Beach Energy’s production continues to decline while oil and gas prices are rising. The company remains without a permanent CEO and its strategy is unclear.
At 5.307mmboe, 2Q22 production was 7% below 1Q22 which itself was 4% below the previous quarter. Declines in Western Flank production are part of the explanation and lower Otway production was attributed to lower nominations. While BPT highlighted the now connected Geographe 2 wells can lift production capacity to 180TJ/day, production over the last two weeks has only been 50TJ/day.
Revenue for the quarter reached A$398 million as the average sales price realised for oil reached A$117.10/bbl and gas achieved A$7.60/GJ. Quarterly capex of $221 million leaves a heavy load for 2H22 so net cash flow may look flattering in 1H22.
Investment view
The macro environment keeps getting better for BPT, as does the domestic gas market. But while the big picture looks attractive, the situation inside BPT continues to resemble a messy teenager’s bedroom.
We worry that good projects like Waitsia may not be allowed to run as well as it should, rather than as a single shareholder might wish. BPT could become a vastly improved investment proposition if the right CEO is given his head.
The quarterly was also conspicuous for its lack of commentary on the Trefoil FID. This project would consume about 20% of BPT’s market capitalisation and would be a poor use of capital in our view.
We see the irony in BPT being a high beta oil play given how little oil production is being generated. Our longer term concerns on free cash flow promises versus the reality are unresolved, particularly as production declines and capex soars. We maintain our Sell recommendation.
