Australia's Beach Energy reports 11% drop in annual underlying profit
Australian energy producer Beach Energy reported an 11% year/year decrease in underlying net profit for the 12 months to June 30 (FY2024), citing higher costs associated with its non-operated Cooper basin joint venture.
The underlying net profit, excluding extraordinary items, was A$341mn ($224.5mn), down from A$385mn. Beach also reported a net loss of A$475.3mn for FY2024, compared with a A$400.8mn profit the previous year.
The weak results were anticipated after the company in June announced a A$400mn impairment charge in FY2024, stemming from a reassessment of its Bass basin assets in Australia and the Taranaki basin project in New Zealand. Despite these setbacks, revenue for the year increased by 9% year/year to A$1.61bn, driven by higher realised oil and gas prices. Beach produced 18.2mn barrels of oil equivalent (boe) in FY2024, down from 19.5mn boe the previous year.
Beach CEO Brett Woods noted that the company has recently observed pressure declines at the Enterprise field, leading to a revision of reserves. “We have moved rapidly to assess the impact. This has resulted in a reserves revision, which has been included in our annual reserves statement and audited by external experts. There is no impact on production guidance. The Enterprise field remains a valuable asset within Beach’s portfolio and an important source of new gas supply for the East Coast market,” Woods stated. The first gas from the Enterprise field was announced in June. In January, Beach signed a gas sales agreement to supply Origin Energy with gas from the Enterprise field until the end of 2026.
Beach estimated its proven and probable reserves in FY2024 at 205mn boe, down from 255mn boe at the end of FY2023. Looking ahead to FY2025, Beach noted that major projects in the Perth and Otway basins are scheduled for completion. The company expects to produce between 17.5 and 21.5mn boe in FY2025, with capital expenditure estimated between A$700mn and A$800mn, compared with A$930mn in FY2024.
Planned activities for FY2025 include delivering structural cost savings in line with strategic review objectives and working with joint venture partner and operator Mitsui to commission the Waitsia gas plant and ramp up production.
Beach is facing further delays and cost escalations on its Waitsia Stage 2 gas project in Western Australia due to quality issues encountered during pre-commissioning activities. Consequently, Beach has revised its share of the total capital expenditure estimate for the project to between A$600-A$650mn, up from the previous estimate of A$400-A$450mn, following a prior increase of A$50mn last year.
The company is now planning to reduce its workforce by 30% as part of a strategic review aimed at enhancing efficiency. This move follows the company's earlier announcement of conducting a comprehensive strategic review with the goals of re-establishing its core business, improving shareholder returns, driving efficiency, and positioning itself for growth.