Beach Energy share price on watch as production misses guidance

The Beach Energy Ltd (ASX: BPT) share price is one to watch this morning after narrowly missing its full-year production guidance.

What were the key takeaways?

Revenue for the year ended 30 June 2020 (FY20) fell 17% from the prior corresponding period (pcp) to $1,728.2 million.

Beach had more than $600 million in sales gas and ethane revenues with more than 99% of gas sold under contract.

FY20 production fell 9% to 26.7 million barrels of oil equivalent (MMboe), below the 27-28 million MMboe guidance range. The Aussie energy group drilled 178 wells with an 81% overall success rate during the year.

FY20 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 19% to $1,108 million. Beach’s underlying EBITDA margin fell 400 basis points to 67%.

Net profit after tax (NPAT) slumped 13% lower on pcp to $500.8 million while underlying NPAT fell 18% to $461.0 million.

The Beach Energy share price is down 41.5% to $1.48 per share in 2020 prior to this morning’s open.

Net tangible asset backing jumped to $1.19, up from $1.02 per share in FY19. Net cash slumped 71% to $50 million but Beach did announce a final dividend.

Beach Energy paid out $45.6 million in dividends, unchanged from FY19, which translated to a 1.0 cents per share (cps) payment.

Combined with a 1.0 cps interim dividend, the Aussie energy group paid a 2 cps total dividend for FY20.

The Aussie energy group reported organic 2P reserves replacement above 200% for three straight years.

2P reserves increased by 8% from 326 MMboe to 352 MMboe during the year with 2P reservees life increased from 12.4 years to 13.2 years.

New rig contract

The Beach Energy share price is worth watching after the energy group reported a new offshore drilling agreement with Diamond Offshore General Company this morning.

The agreement will use the Ocean Onyx Semi-submersible rig to undertake Beach’s Victorian Otway offshore drilling program.

The agreement provides for the drilling of up to 9 wells (6 firm with 3 options) with operations expected to start between December 2020 and March 2021.

A new settlement agreement was also signed to dismiss all current legal proceedings with Diamond.

Outlook for Beach Energy share price

The group has reduced planned capital expenditure for FY21 by 30% with an expected slowdown due to the coronavirus pandemic. 

Production is expected to be 26.0-28.5 MMboe with capital expenditure of $650-750 million.

Underlying EBITDA is expected to fall by 10-20% to $900-1,100 million.

Beach reported a 5-year outlook with production on track to deliver 37-43 MMboe in FY25.

The Beach Energy share price is one to watch as management reduced its growth outlook based on COVID-19 and the expenditure deferral.

Beach’s 5-year free cash flow outlook has been revised from $2.7 billion to $2.1 billion based on a lower oil price assumption.

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Motley Fool contributor Ken Hall 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.

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