Beach Energy joined larger rival Santos in revealing ambitious plans to boost production, sales, and earnings over the next few years at a time when global oil prices are at their highest levels since late 2014 when the great oil slide was gathering pace.
Santos on Wednesday told its annual investor day it had plans to boost production to more than 100 million barrels of oil equivalent (MMboe)by 2025.
Yesterday Beach told its investor day outing that it has plans to grow production to 34–40 MMboe by 2022-23.
Their larger rival, Woodside already is targeting 2020 as the year when its annual production will reach and top the 100 million barrel level.
Beach told analysts and investors that this production growth, while dependent upon reservoir performance and drilling outcomes, will be underpinned by a strong cash position, with Beach targeting delivery of more than $2.3 billion free cash flow over five years.
Investors liked the ambition and sent Beach shares up by more than 11% to $2.23, an all-time high. They closed up 7.5% at $2.14.
Beach CEO Matt Kay told investors “Supplying the (Australian) east coast gas market remains a strategic imperative for Beach.”
“More than three-quarters of our discretionary investment will be directed towards bringing new supply into the market over the next 5 years, where we already have a 15% market share,” he said.
“We have delivered on our promises to perform as a low-cost operator, to deliver the highest standards of safety and sustainability, and to drive increased value for our shareholders,” Mr. Kay said.
“Now, as we look ahead at the next 5 years, we see a very exciting period of growth for the company.
“With the new portfolio combined with the Cooper Basin, we are targeting delivery of more than $2.3 billion free cash flow over five years.
“As a result, we expect to be close to debt free by the end of FY20, a remarkable achievement considering our net gearing stood at 33% at the end of January this year.
Beach said the “Key highlights” of the investor day included:
- FY23 production target of 34–40 MMboe – up from FY18 result of 19.0 MMboe and FY19 forecast of 26–28 MMboe
- Targeting more than $2.3 billion in five-year cumulative free cash flow
- Return on Capital Employed OCE targets for the next 5 years of between 17% and 20%
- A program of high return/ low-risk investment, with almost 90 percent of capital being discretionary investment with two-thirds targeting greater than 40% rate of return4
- Close to zero net debt position by FY20, providing significant capital management optionality
