PERTH (miningweekly.com) – Oil and gas producer Beach Energy has reported lower production and revenue for the full year ended June, compared with the 2019 financial year.
The ASX-listed company on Monday reported that oil and gas production for the full year reached 26.7-million barrels of oil equivalent, down from the 29.4-million barrels of oil equivalent produced in 2019, however, oil production reached a record 8.8-million barrels during the year.
Sales revenue for the year under review declined from A$1.9-billion to A$1.6-billion on the back of the lower production and lower oil prices linked to the Covid-19 pandemic.
Underlying net profit after tax for the period declined from A$560-million to A$461-million, however, Beach bucked the trend and did not report any writedown on its producing assets.
MD Matt Kay told shareholder that the company’s robust financial position entering into the Covid-19 pandemic meant that Beach was well positioned to succeed in the lower oil price environment and to continue its actively-controlled growth programme.
“In a year like no other, FY20 demonstrated the resilience of the Beach business,” Kay said.
“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 2020. Our diverse business generated a 19% return on capital employed, and our excellent performance with the drill bit saw 178 wells drilled at an 81% success rate, contributing to a 2P organic reserves replacement ratio of 214%.
“Given our high margin, high returning business, Beach was in an enviable position at the end of the financial year in which we had no material writedowns and were able to maintain our final dividend at 1 cent.”
Kay said the strong operational performance of the business, with production of 26.7-million barrels of oil equivalent, 2% higher than pro forma 2019 production, was a testament to how Beach managed the impacts of Covid-19 across the business.
“2020 was a year in which we made new gas discoveries in the Perth and Otway basins, we commissioned a new gas plant in South Australia and connected new supply to our Otway Gas Plant in Victoria, the first new supply to that plant in more than four years,” Kay said.
“Western Flank oil again hit new heights, producing as much as 23 000 bbl/d in the second half of 2020, and, significantly, Beach achieved an organic 2P reserves replacement above 200% for the third consecutive year.
“Our facilities performed at 98% reliability, a testament to the performance and the resilience of our workforce in 2020.”
Kay said the continued underlying performance of the business coupled with a net cash balance sheet meant Beach would continue to invest through the cycle – albeit at a measured pace with more than A$300-million of 2021 capital expenditure deferred.
“We have made prudent decisions in response to the current low oil price environment and Covid-19, slowing the pace of our current programme and continuing to drive down operating costs – but importantly, our destination remains the same,” he said.
“We have an exciting programme ahead of us, with our offshore drilling campaign in the Victorian Otway basin expected to commence by March 2021 following the execution of a new rig contract with Diamond Offshore.”
In the west, the Waitsia joint venture has made great progress, closing in on a final investment decision of the Stage 2 development in the December quarter, which will see 250 TJ/d of processing capacity developed to supply gas and produce liquefied natural gas (LNG) through the North West Shelf while also committing to ongoing supply to the Western Australia domestic market.
Subject to the finalisation of various agreements and approvals, production is currently estimated to commence in late calendar 2023.
Kay said Beach’s revised low-risk investment profile has a target to deliver between 37-million and 43-million barrels of oil equivalent production in 2025, while generating more than A$2-billion free cash flow at lower price assumptions.
“Beach has set itself up to be in a position of strength during this downturn. We expect to invest in our high-margin and diverse portfolio and target creating over A$2-billion of free cash flow over the next five years,” Kay said.
“Our current projections have Beach remaining in a net cash position through our peak investment years at around $40/bbl Brent. This means Beach has the ability to pursue growth despite the current macro challenges.”
Looking ahead at the next financial year, Beach has set a production target of between 26-million and 28.5-million barrels of oil equivalent for 2021, with capital expenditure projected to be between A$650-million and A$750-million.