Beach Energy jumped more than 7% yesterday as investors appreciated the benefits the $1.6 billion purchase of Lattice Energy from origin Energy would bring to its profit and loss account (and hopefully the share price).
The shares rose 7.1% to $1.355 after the release of its 2017-18 interim report and news of an unchanged interim dividend of 1 cent a share.
It was more a reaction to the promise the Lattice deals brings to Beach which is 22% owned by Kerry Stokes’ Seven Group Holdings. Underlying profit for the December 2017 half rose to $93.1 million on sales that jumped 14% to $392.6 million, helped by higher oil and gas prices.
Beach saw a 30% in realised oil prices in the half, and a 9% gain in gas prices.
Beach wrapped up the acquisition of the conventional oil and gas arm of Origin Energy at the end of January and has now integrating the business with its own.
Production for the full year the year to June 30 is now expected to be between 25.5 million and 27.6 million barrels of oil equivalent, including production from Beach’s existing fields of 10.6 million-11 million boe and Lattice production of 14.9 million-16.6 million boe.
Beach increased its expectation of “synergies” from the Lattice deal to $50 million a year and pushed up its target for debt repayment, with gearing now targeted at below 20% by the end of June 2019, compared to an earlier target of under25%.
As part of its new growth plans, Beach is now aiming to supply around 15 per cent of east coast domestic gas demand, as it expands operations in the Otway and Bass basins off the Victorian coast Beach is also looking to find a partner or partners around 30% of the Otway Gas project to aid its development by spreading the development costs..
Net cash levels also jumped, rising from $148.2 million in the first half of 2017 to $552.2 million in the December 2017 half.
