Beach Energy Limited (BPT)
HOLD

Call the lifeguard

 14 Aug 2023
Sector: Energy

RESULTS ANALYSIS

Need To Know

  • FY24 production guidance 18-21 mmboe, weakest in 5 years. Capex guidance $850-1,000m.
  • CEO bumped as Ryan Stokes joins the Board.
  • Key project delays, reserve and production declines paint a disappointing outlook.

Investment Implications

The cavalry has been sent in to remedy what has been a perennially optimistic yet underperforming company. Ryan Stokes has joined the Board to represent Seven Group’s 30% stake and, coincidentally, the CEO has been punted.

FY23 result. Production of 19.5 mmboe translated into revenue of $1.6bn and EBITDA of $962m, -12% on last year. During the year, average realised gas prices increased 8.6% and oil prices fell 1.5%. Consequently, net profit fell 24% to $401m. Operating cash flow likewise fell 24% just as the heavy capex program hit $1.17bn and is expected to be between $850-1,000m in FY24. BPT overstates its free cash flow by eliminating growth capex from its calculation, which in FY23 was $484m. Net debt now sits at $166m leaving gearing at just 4%, well below its target of <15%.

Outlook. BPT’s key project at Waitsia is again late to the party with Stage 2 of the project delivering first gas in mid-CY24 with higher labour costs nudging the capex bill to $450-500m (net).

More disappointingly, FY24 production is being guided to 18-21 mmboe which is its lowest marker in 5 years.

Investment View

Investors could be forgiven for thinking BPT was all wind and no bagpipe. The consistent production and earnings misses are meshed with a declining reserve profile.

The major shareholder has stepped up its presence on the Board just as the CEO is removed and a permanent replacement not due to start until February 2024.

BPT has doubled the dividend, but this seems a premature reward given the results are yet to justify such a change.

Echoing his predecessor, interim CEO Bruce Clement proclaims that “Beach’s value proposition has never been stronger”. We don’t yet know if new CEO Brett Woods will be singing from the same song sheet or if a big shake-up is required.

Whatever the right strategy is, BPT has plenty of execution needed to justify a share price that has steadfastly ignored the fumbles.

Figure 1: BPT 2P reserves

Figure 2: BPT revenue and average realised oil price

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Stock Overview

Share Price

Company Overview

BPT is an Australia-based oil and gas company with assets in Australia and New Zealand. They explore and produce oil and gas, and own infrastructure in the industry.

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