The Kerry Stokes-dominated Beach Energy has made an important change to dividend policy to allow it to start giving shareholders more of its half a billion plus in unused franking credits.
Given the angst in sharemarkets at the moment, it was an unusual bit of news. the shares closed up 0.3% at 41.52 on the ASX on Monday.
The most immediate impact of the change in policy was the doubling in the size of the interim from one cent per share paid a year ago to 2 cents per share (fully franked of course) with the prospects of more – if earnings improve, as the company expects from 2024 and 2025.
Beach explained the change in Monday’s release, “This enables distribution of franking credits to shareholders (around $590 million as at December 31)
Beach added that, “Our continued Balance Sheet strength, including a net cash position at the end of the half, supports our decision to implement our new dividend policy now.
“It ensures Beach can continue to invest further in growth beyond our current projects while increasing dividend payments to shareholders.”
The company said it had a net cash and liquidity position at December 31 of $609 million.
“The new dividend policy will reward our shareholders for their ongoing commitment to our strategy, targeting a payout ratio of 40-50% of pre-growth free cash flow and enabling the distribution of our substantial franking credit balance.
“Having invested in our major growth projects we are now in a position to reward shareholders.”
Kerry Stokes’ master company Seven Group Holdings, which owns 30% of Beach, reports its December 31 results tomorrow (Wednesday) and will now enjoy a higher fully franked dividend stream.
The interim results from the company were OK, but there was a recast guidance note for the year to June 30 with the target for production narrowed to 19 to 20.5 million barrels of oil equivalent (MMboe) from the previous forecast of 20 to 22.5 million barrels.
Field operational cost per barrel is up to $US13.75 to $US14.75 a barrel from the original forecast of $12 to $13 a barrel. Capex will end up around $1 billion instead of a little less.
Beach reported sales revenue up 3% to $813 million for the December half, underlying EBITDA down 4% to $491 million and underlying profit after tax down 10% to $191 million.
CEO Morné Engelbrecht said in Monday’s release “Our agreement with Webuild to complete the Waitsia Stage 2 project and the Environmental Plan approval for installation of the offshore Otway Thylacine wells are big steps forward for Beach in 2023. These two projects will trigger a step-change in production and free cash flow generation from FY24.
“Our agreement with Webuild to complete the Waitsia Stage 2 project is particularly welcome news. Webuild and the Waitsia JV are now planning for first gas from the Waitsia Gas Plant by the end of 2023.
“We also completed our development drilling campaign at Waitsia during the half and we have since had success from the Perth Basin exploration campaign, which soon turns to the Beach-operated phase commencing in early Q4 FY23 with the spudding of Trigg 1.
“In the Otway Basin, the Thylacine well connections will add up to 100 terajoules a day through the Otway Gas Plant. These extra volumes will be available for the East Coast market, which will again be stretched for supply in the coming winter.
“While we are focussed on delivering energy security through increased gas supply in Australia and New Zealand, we are equally focussed on reducing our emissions, and exploring new energy opportunities across our portfolio.
“The Moomba CCS project is one of Australia’s most significant emissions reduction activities and will deliver up to 1.7 million tonnes of CO2 abatement once operational.
