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Why this ASX 100 energy stock is falling today

Phil Harpur
oil company share price

The Beach Energy Ltd (ASX: BPT) share price is down by 4.3% at the time of writing following the release of the company’s H1 FY20 results.

What did Beach Energy announce?

Beach Energy announced a strong underlying net profit after tax of $274 million. Taking into account the contribution from the Vic Otway sale, completed late in FY19, underlying NPAT was up 9% on the corresponding half. Meanwhile, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $622 million.

The ASX 100 energy producer reported a strong balance sheet position with $60 million net cash at 31 December 2019 and announced an interim dividend of 1.0 cent per share.

Operational update

The Kupe plant statutory shutdown was completed on time and on budget last November, with more than 80,000 hours of work executed. Beach Energy’s focus on performance has seen average facility reliability improve to 98% across the business.

On the drilling front, the first half of FY20 was reported to be extremely active across the Cooper, Perth and Otway basins, with 105 wells drilled at a success rate of 83%.

Of note, the Beharra Springs Deep-1 well made a material gas discovery in the Perth Basin, Dombey-1 delivered a gas discovery in the SA Otway Basin, and appraisal work in the Bauer Field confirmed another field extension.

Beach Energy is undertaking further infrastructure expansion in the Western Flank to support higher levels of oil production, as well as additions such as participation in the large Tawhaki exploration prospect in offshore New Zealand and a new two-well appraisal campaign in the SA Otway Basin.

Beach Energy noted that its attention is focused on the back end of the year, in which the Victorian Otway campaign continues to ramp up. Its Victorian Otway drilling program has now commenced, with Black Watch-1 expected to reach target depth in early March this year. 

In the Cooper Basin, Beach Energy continues its Western Flank exploration and appraisal campaign with a view to increasing oil and gas production. The company will also support facility upgrades at Port Bonython to deliver improved capacity.

In the Perth Basin, Beach Energy is targeting a final investment decision for Waitsia Stage 2 by the end of the financial year. Meanwhile, in New Zealand, the company is keenly awaiting the results of the Tawhaki exploration well which is currently drilling.

Updated guidance

The above additional activity has led Beach Energy to update its FY20 capital expenditure guidance to $875 million – 950 million, up from $750 million – 850 million.

The company also updated its underlying EBITDA guidance to $1.275 billion – 1.35 billion as well as lowering its FY20 production guidance to between 27 million barrels of oil equivalent (MMboe) and 28 MMboe.

After strong gas demand and high customer nominations in FY19, customer demand was noted as being lower in the first half of FY20, primarily from Beach Energy’s East Coast assets (Victorian Otway, BassGas and Cooper Basin).

The post Why this ASX 100 energy stock is falling today appeared first on Motley Fool Australia.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020