Beach Energy (BPT) Swing To Profit FY12

Beach Energy (BPT) is an oil and gas exploration and production company based in South Australia. BPT has oil and gas reserves of 92 million barrels of oil equivalent (mmboe) equivalent and contingent resources of 466.6 mboe.

The company holds interests in more than 300 exploration and production tenements in Australia, New Zealand, Papua New Guinea, Tanzania and Egypt among others.

FY12 and 1Q13 results

BPT reported an FY12 net profit of $164 million, a massive swing from FY11’s net loss of $97.5 million. A solid underlying profit figure of $122 million was posted, up a staggering 190% on the prior year.

Sales revenue was up 25% to $619 million, driven by higher oil and gas prices and increased sales volume. FY12 production was 7.5 mmboe, up 14% from FY11 due to better operational access and the first oil production in Egypt.

The group has more recently reported its quarterly results, with production increasing 2% on the previous quarter to 2.1 mmboe. BPT’s quarterly results put it on tract to reach its forecasted FY13 production of 8.5 – 9.0 mmboe.

Oil outlook

The chart above shows oil prices (white line) compared to BPT’s stock price (yellow line). As is evident from the chart, oil prices and BPT’s share price are highly correlated.

China accounts for over 10% of the global oil consumption and is one the fastest growing consumers of the liquid. The country’s recently released October import figures revealed that its demand for oil increased 6.6% on the prior year, to 9.76 million barrels per day.

This is the third highest level of Chinese demand on record, and as China’s economy recovers this should translate into further demand and thus an increase in the oil price.

Looking ahead

The group is in the process of expanding its current wells and exploring potential development. To that end the company has forecasted  for around $155 million in development expenditure and $195 million in exploration expenditure for FY13.

These developments and explorations are more or less funded, as the company has $352 million cash on its balance sheet and access of another $150 million via a financing facility.

We see limited risk to the groups FY13 production of 8.5 – 9.0 mmboe, given the 1Q result and in our view conservative forecast.

Given the strength of oil prices over the last month and the potential upside from its current capital expenditure program we feel that BPT share price has further appreciation ahead.

This article was distributed to our members on November 26thth, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Beach Energy but all our current trading ideas. Simply click here and starting trading today.