Beach Energy Share Price Up Despite Hit from Oil Collapse (ASX:BPT)

Headquartered in Adelaide, Beach Energy Ltd [ASX:BPT] is Australia’s largest onshore oil producer. The company reported its FY20 results today.

As it turns out, Beach Energy didn’t escape the pandemic and the subsequent oil collapse in April unscathed.

Lower profits, lower oil production

Beach Energy reported a net profit after tax of $501 million, a 13% drop from the previous year.

The company produced 26.7 million barrels of oil equivalent (MMboe), a 9% decline from FY19. Sales volumes were also 11% lower. Revenue dropped by about 14% to 1,650 million because of lower oil prices.

Beach Energy saw a 21% decrease in realised oil prices from the previous fiscal year. What helped was that this was partly offset by a 7% increase in average realised gas and ethane prices. Beach Energy’s gas business doesn’t have much exposure to gas spot prices, with most of it sold under contract.

Managing Director Matt Kay said:

In a year like no other, FY20 demonstrated the resilience of the Beach business. Our net cash balance sheet position, high margin oil business, stable gas revenues and dedicated staff delivered a strong full year result despite the choppy waters that confronted us in the second half of FY20. Our diverse business generated a 19% ROCE, and our excellent performance with the drill bit saw 178 wells drilled at an 81 per cent success rate, contributing to a 2P organic reserves replacement ratio of 214 percent.

Beach Energy also took the opportunity to announce it has signed a new rig contract with Diamond Offshore General Company. This will be to use the Ocean Onyx semi-submersible rig to take on Beach’s Victorian Otway Basin offshore drilling program.

What could happen next?

Beach Energy expects to produce between 26 and 28.5 MMboe for FY21 and an underlying EBITDA of $900 to 1 billion.

The company has reduced its planned capital expenditure for FY21 by 30% and will continue to drive down costs.

As Managing Director Matt Kay continued:

Our current projections have Beach remaining in a net cash position through our peak investment years at around US$40/bbl Brent. This means Beach has the ability to pursue growth despite the current macro challenges.

At time of writing, the BPT share price was trading at $1.54, which is a 4.54% increase from yesterday.

Even with the drop in profits and revenue, Beach Energy has kept its final dividend of 1 cent per share.

If you are interested in dividend plays, you can check out our free report, ‘Five Dividend Stocks Set to Thrive in the Post-Pandemic Era’ . You can access it here.

Best,

Selva Freigedo,

For The Rum Rebellion


Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.


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