Beach Energy shares jumped 6% on Thursday after it produced an upbeat December quarter and half year production report and upgraded its full-year production guidance by a solid 10% plus.
The shares rose past $1.80 after the company told the ASX that it had “reviewed FY19 full-year production and capital expenditure guidance to reflect its first two quarterly reports, latest expectations on the timing of closing of the proposed sale of 40% of Beach’s Victorian Otway interests (“Otway Sale”) and latest expectations for H2 FY19.”
The shares ended at $1.180, up 5.5% on the day and more than 33% for the year so far.
As a result, its 2018-19 financial year production guidance has been increased from 25 – 27 million barrels of oil equivalent (MMboe) to 28 – 29 MMboe.
Beach said the increase was due to: “Better than expected H1 FY19 production of 15.2 MMboe; Revised H2 FY19 forecast output after factoring in higher Bauer oil production, higher than originally expected customer gas nominations and improvement in facility reliability.”
And the timing of the expected completion date for the Otway Sale “changing from 31 December 2018 to 31 March 2019. The change is driven by the expectation the Otway Sale will complete closer to the end of the March 2019 quarter.”
“For accounting purposes, Beach will continue to report beneficial ownership of a 100% interest in its Victorian Otway assets until 31 March 2019 and then report 60% interest from 1 April 2019.
“Prior guidance assumed that Beach would report beneficial ownership of a 100% interest until 31 December 2018. Moving the expected completion date by three months has contributed an estimated 0.7 – 0.9 MMboe to the revised production guidance range,” Beach explained in yesterday’s statement.
As well the company, which is 25% controlled by Kerry Stokes’ Seven Group Holdings, said “FY19 capital expenditure guidance has been narrowed from $440 – 520 million to $450 – 500 million.”
“The rate of capital expenditure is expected to increase in H2 FY19 as Beach progresses the development of value-accretive growth projects, as outlined in its investor briefing in September 2018. Key investment activities in H2 FY19 include the following:
- Commencement of drilling in the onshore South Australian Otway Basin in the March 2019 quarter commencing with Haselgrove-4 followed by Dombey-1
- Ordering of long lead items associated with the Victorian Otway drilling programs, with drilling scheduled to commence in H1 FY20.
- The addition of a drilling rig in the Western Flank, expected to start in the June 2019 quarter
- Four drilling rigs operating in the Cooper Basin JV for the entire H2 FY19 after commencing operations in August 2018.
In the three months to December Beach benefited from the purchase of Lattice, good exploration success and reliable production.
As well the company said “December quarterly production of 7.4 MMboe was 4% below the September quarter. A 17% increase in ex PEL 91 oil production combined with Otway gas sales 30% above prior year levels, largely offset seasonally lower gas demand.
“Sales volume of 7.7 MMboe was 7% below the September quarter, primarily due to lower seasonal sales gas.
Sales revenue of $441 million declined 14% from the September quarter despite a 17% reduction in realised oil price.”
That made a total for the six months to December of $955 million. That is not comparable with a year earlier because of the acquisition of Lattice and its extra production (and costs).
