The Beach Energy Ltd (ASX: BPT) share price surged higher to start the week after a solid full-year earnings announcement.
What did Beach Energy announce?
Despite the challenges for oil and gas producers, Beach reported a 9% drop in FY20 production to 26.7 million barrels of oil equivalent (MMboe).
That was just shy of Beach’s guidance for 27-28 million barrels as net profit fell 13% to $500.8 million.
Net tangible asset backing climbed to $1.19 per share, up from $1.02 per share. The Aussie producer also managed to pay a 1.0 cents per share final dividend.
That strong result sparked a 7.1% rally in the Beach Energy share price yesterday. In fact, the ASX energy share led the S&P/ASX 200 Index (ASX: XJO) gainers list.
It’s an impressive feat for an Aussie energy producer in the current market. The coronavirus pandemic and oil price war have hit the producers like Beach Energy quite hard.
However, the August earnings result and 5-year outlook appear to be better than many investors were pricing in.
Did Beach Energy provide any guidance?
Unlike many Aussie companies, Beach also provided FY21 guidance despite current challenges.
The group expects to report underlying earnings before interest, tax, depreciation and amortisation (EBITDA) down 10-20% to $900-1,100 million.
The 5-year free cash flow outlook remains strong despite being downgraded from $2.7 billion to $2.1 billion.
I think tough conditions and a lower oil price will hurt short-term earnings and the Beach Energy share price.
However, Beach expects production of 26.0-28.5 MMboe in FY21 despite a planned 30% reduction in capital expenditure.
Is the Beach Energy share price in the buy zone?
I think there are a lot of positives to take away from yesterday’s result.
Based on the closing share of $1.58, Beach paid out a 1.3% dividend yield. That’s not enormous but I still think it’s a positive given the challenges for ASX energy shares.
The Beach Energy share price is also trading at a price-to-earnings (P/E) ratio of just 6.3.
That could mean now is time to snap up a speculative bargain for investors willing to roll the dice.
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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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