Beach Energy yesterday revealed an 87% drop in net profit for 2010, but is confident it can grow in 2011.
The fall was due to a combination of factors, especially the absence of any one-off asset sales as there was in the 2009 year which boosted that year’s bottom line.
Beach said net profit for the 2010 year was $33.442 million, down from $260.4 million in 2008-09.
Revenue for the year fell 16% to $487.47 million, from $581.37 million in 2009.
Despite the big fall in earnings and revenue, investors liked the result, marking the shares up more than 7%, or 4.5c, to 65c.
Beach said the fall in net profit was due to reduced sales and large impairment costs, offset by the recognition of the receipt of the Tipton West funds and reduced depreciation and amortisation charges.
"Beach continues to be one of Australia’s most active oil and gas production companies, despite a difficult year operationally, due to severe flooding and localised rain events in our Cooper Basin tenements, Beach continues to be one of Australia’s most active oil and gas production companies," the company said in its statement to the ASX.
Beach achieved an annual production of 7.3 MMboe in 2009-10, with operated assets on the western flank of the Cooper Basin maintaining the production levels set in 2008-09.
Beach will pay a final dividend of one cent per share, part franked, bringing the full year dividend to 1.75c.
Beach Energy said sales revenue was lower largely as a result of flooding in the Cooper Basin, which interrupted oil and gas production, and the divestment of the Tipton West project.
"Our first priority in the year just gone was to ensure stability of earnings during these volatile times to provide the basis for future growth," Beach managing director Reg Nelson said in a statement today.
"We have done this by maintaining solid production levels from our existing reserves, while seeking to accelerate the development of the large contingent resources, primarily gas and petroleum liquids, in the Cooper Basin.
"The operating business remained steady, with this financial year affected by the decline in oil and gas sales revenue as a result of the flooding in the Cooper Basin and the decline in revenue from the BMG assets," Mr Nelson said.
There seems to have been relief among investors that the flooding and production hitches in South Australia didn’t plunge the company into the red in the year to June.
Mr Nelson said that "the year end results have shown that Beach’s underlying profitability remains sound, despite a year of challenges.
"Its balance sheet remains strong, with no drawn-down debt and a good cash position at year end of $170 million.
"In a year where our exploration and developments were constrained by flooding and other natural events, we have replaced what we have produced – reserves are unchanged from the start of the year.
"More particularly, there are very encouraging signs that its large contingent conventional resource base can now be converted steadily over the next few years to add to reserves significantly.
"Beach has acquired a dominant position for shale gas in the Cooper Basin through its own operating interests in the prime Nappamerri Trough and through the Cooper Basin Joint Venture regions surrounding the Trough.
"It now also holds a good position in the onshore Otway Basin (both directly and indirectly through its majority shareholding in Somerton Energy Limited) and through its farm-in with Lakes Oil Limited in the onshore Gippsland Basin of eastern Victoria."
