Beach Energy Ltd (ASX: BPT)

BPT Details

Potential for commercialisation of a large gas resource: Beach Energy announced a new gas field discovery at Haselgrove-3 ST1 in the onshore Otway Basin, South Australia. Flow test results from the primary target Sawpit Sandstone indicated a high deliverability reservoir and also provided an encouragement to move towards commercialisation of a large gas resource. Beach also plans to undertake an immediate follow up for the testing to confirm the well deliverability and also to assess the connected volumes and gas compositions. Then a cased hole test was also undertaken over the 4,023-4,185-metre interval which flowed gas at a rate of 25MMscfd and it sustained over a 100-minute period through 36/64 choke. It indicates that Sawpit Sandstone can flow at rates greater than 25MMscfd and preliminary gas sample analysis indicates a low insert content which will minimise gas processing requirements. South Australian government has supported by providing $6 million PACE gas grant which was a crucial element in Beach’s decision to drill the well.

BPT has also completed its initial phase of FY18 operated gas exploration and also an appraisal campaign which focussed on the Southwest Patchawarra (SWP) and on Permian Edge (PE) play fairways. It proved fruitful with four exploration successes from the six wells which included discoveries of the new field at Lowry and Largs. Also, the wells which are ceased and suspended will be in operations in early FY19. Now Beach’s operated drilling program will move northward to the Stunsail and Kalladeina fields in ex PEL 91 for which oil appraisal and development campaign will be undertaken in Q3FY18. Also, the six-well campaign which was started to develop the McKinlay Field, was completed successfully, and these wells are expected to be brought into the production by the end of FY18.

Looking at the financial position, the group has performed well with FY17 underlying net profit after tax increasing 353% to $162 million, which was achieved against the backdrop of an increase in oil price. Operating cash flow increased 38% to $321 million and also the Cooper Joint Venture generated $105 million free cash flow which was a significant increase over last year. The production level of oil also increased which was due to the more drilling of wells and resulted in optimised production from the existing fields. It also acquired Lattice Energy that transformed BPT into a cash generating unit as now Beach has become a multi-basin producer and also provides a stability of earnings through long term gas sales contract. BPT is now targeting 10.0 to 10.6 million barrels of oil for FY18.
 

Haselgrove-3 ST1 Concentration (Source: Company Reports)
 
The Company’s share price has skyrocketed about 118.5% in last six months (as at January 15, 2018) on the basis of positive financial performance and strategic acquisitions along with boost from commodity prices. It forecasted an increase of production by 150% and also the oil reserves are expected to triple to be around 232 MMboe. BPT also expects to provide $20 million worth of overhead and corporate savings through the identified synergies. However, the outlook for 2018 looks mixed given the oil price scenario and concerns on group’s gas industrialisation efforts along with speculations on well depletion near the new discovery. Given the trading scenario and above factors, we put a “Sell” recommendation at the current price of $1.38


BPT Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.