Another quarter, another sand-soft production outcome for Beach Energy. Quarterly revenue is also soft due to falling commodity prices. Previously lowered FY23 production guidance is achievable, but probably at the low end.
BPT is now expecting full year Western Flank oil production to decline by more than 10% (FY22 was 3.4MMbbls). Recently connected wells will determine the actual outcome but the natural field decline continues to weigh.
In the Otway Basin (Victoria), one of three flowlines failed a hydro pressure test which will impact the connection of the Thylacine West 1 and 2 wells. This means only two of the four planned wells can be connected in mid-CY23, while timing on the others remains uncertain. The ramifications for FY24f production are unknown at this point, but the news is not positive.
Lower average realised oil prices (-6%) in the quarter have impacted the revenue outcome which fell 13% to $353m compared to 2Q23.
Investment View
At the interim result in February, BPT lowered its FY23 production guidance to 19.0-20.5MMbbls and abandoned its FY24 guidance altogether. The progress of the major projects will determine how quickly BPT can regain a positive production trajectory, but it still keeps stubbing its toes.
To some extent, the high commodity prices enjoyed in the last year have masked the production jitters going on at BPT. Lower prices are now exposing the difficulties BPT is facing across its portfolio.
The introduction of Webuild to the Waitsia project has been a small win with first gas being targeted for the end of 2023.
The Moomba CCS project is also now 50% complete with first CO2 injection due in 2024.
BPT remains an awkward prospect and our Hold recommendation is a nervous wait for improving news.
Risks to Investment View
BPT may successfully develop its major projects and deliver on the guided free cashflow generation and production targets.
Recommendation
We have retained our Hold recommendation.
Figure 1: BPT QUARTERLY PRODUCTION
