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.

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Beach Energy (BPT) is an oil and gas exploration and production company based in South Australia. BPT has oil and gas reserves of 66 million barrels of oil equivalent (mboe) equivalent and contingent resources of 297 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.

BPT was among the worst performers in the Australian share market last year on the back of declining oil and gas production.

The drop in output was due to planned and unplanned downtime at the Basker Manta Gummy project and a natural resource decline and downtime at the Cooper Basin.

Unsuccessful exploration in the Bass Basin also resulted in a $64 million writedown.

The end of last year saw things start to turn around for BPT as it gained majority control of Impress Energy in an on market takeover.

A revival of shale gas assets in the Cooper Basin helped by enhanced drilling technology gave BPT further upside.

This year has been all in all positive for Beach Energy as oil prices surge to new highs.

Impressive takeover

On 6 December 2010, BPT announced a recommended and unconditional on market cash offer of 8.5 cents per share for all the issued and outstanding shares of Impress Energy it did not own.

BPT subsequently gained majority control of Impress on 14 December 2010.

Overall, BPT spent $38.1 million on the Impress acquisition.

The Impress takeover gives BPT access to the Cooper Basin Western Flank oil. Impress holds a 40% interest in highly prospective Western Flank oil acreage.

Drilling has commenced and if successful will provide a material reserves upgrade and subsequent significant increase in operated production during FY11 and FY12.

A dominant shale gas acreage in the Cooper Basin has shown encouraging results with potential for a material resource booking in 2011.

Saved by oil again

Beach Energy this week reported its 1H11 results, keeping the market happy.

Gross profit for the half of $37 million was down 18% on the prior year, driven mainly by lower production.

Sales revenue gained 2% to $265 million due to higher prices, partly offset by higher Aussie dollar.

Oil sales revenue was up $3 million due to higher sales volumes, which included the sale of crude from the Jackson-Moonie pipeline.

Underlying profit for the half totalled $19 million, 27% lower than the previous year’s half.

BPT declared a 1 cent per share dividend based on its FY10 results and has further announced a half dividend of 0.75 cents per share.

Oily time

For the first half of FY11, BPT achieved an average oil price of US$81 a barrel, up 8% on year. Average gas prices were also up 8%.

Oil prices have since had an impressive run, currently hovering around the US$100 a barrel level.

Tension in the Middle East and North Africa is threatening oil supply which has resulted in a run up in oil prices.

However, a stronger Aussie dollar is likely to offset part of the oil price gain effect.

Looking ahead

BPT had $179 million cash on hand and no debt as at 31 December 2010 which gives it plenty of room for further exploration.

The company has a large resource base and excellent prospects for reserves growth via resource conversion and exploration.

BPT has given FY11 production guidance of 7 mboe which may be upgraded following the Impress takeover.  It has been one of the hot shares to buy in recent months, surging more than 30% since early December.

We feel the stock has significant upside potential on the back of the Impress takeover and rising energy prices.

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