A new CEO is bringing a more pragmatic approach to disclosure, but Beach Energy remains a chimera for investors, best left well alone. The reality is that BPT has yet again over-promised and under-delivered with reserves and production heading in the wrong direction.
FY22 EBITDA and net profit both missed consensus expectations by about 10%. Given that the revenue number was already known from the 4Q22 production release, the earnings miss was mostly attributable to cost differences.
Annual production declined for the third year running (Figure 3) and the FY22 result was saved from its blushes by the extraordinary 79% rise in the average realised (AUD) oil price for the year.
FY23f production guidance of 20-22.5mmboe is lower than last year’s guidance range and well under consensus of 23.2mmboe. In August 2019, the company had guided FY23f production to be 30-34mmboe. The FY24f ‘delivery’ target sits optimistically at up to 28mmboe.
The wobbles in production have multiplied through into free cashflow generation which is now likely to be about $1.3 billion lower than BPT was forecasting across FY20-23f, as this period ends with production some 30% below target.
The Western Flank saw a further 23% downgrade to 2P reserves (Figure 5). Total 2P reserves declined to 283mmboe from 339mmboe in FY21 and about 56% of 2P reserves are undeveloped. Other than the ~22mmboe of production, the fall in 2P reserves is explained by the ~25mmboe deferral of the Trefoil development in the Bass Basin and ~7mmboe of Western Flank reduction.
BPT’s claim to have ‘grown’ operating cashflow to ~$1.2 billion neglects to attribute most of the gain from higher oil prices. Free cashflow was claimed to be $752 million but excludes the expenditure in the offshore Otway Basin, Waitsia Stage 2, Western Flank oil exploration and Moomba CCS. All of those projects add up to $531 million of ‘growth’ expenditure which in reality is capex. Adjusting for this classification interpretation by BPT, free cashflow was $316 million. Capex guidance for FY23f is $800-1,000 million.
Investment view
The share price remains obtusely misaligned with the facts. The cashflow and production outcomes have fallen well short of guidance and yet the share price is roughly the same as 3 years ago. The world energy scene is admittedly sharply different as oil prices tell us, but that does not provide BPT with an excuse for its own performance. Fortunately, new CEO Morné Engelbrecht (appointed May 2022) may bring afresh approach to the company that can begin to justify the market’s lofty ranking. Right now, that simply is not the case.
Figure 1: BPT FY22 result
Figure 2: BPT revenue
Figure 3: BPT production
Figure 4: BPT 2P reserves
Figure 5: BPT 2P reserves
