Beach Energy to book A$365-A$400mn impairment charge on gas assets
Sydney-listed Beach Energy announced on June 11 that it expects to recognise an impairment charge in the 12 months to June 2024 (FY24) due to a reassessment of its Bass basin assets in Australia and the Taranaki basin project in New Zealand.
The company anticipates booking a non-cash impairment of A$365-A$400mn ($241-$264mn) before tax in its FY24 full-year results, set to be released on August 12.
Beach estimates an A$115-A$125mn impairment to the Taranaki assets due to low gas flow rates at the Kupe South 9 development well. “The Kupe South 9 development well was drilled in Q2 FY24 to target gas in an eastern area of the Kupe field. The well delivered low gas flow rates after connection to the Kupe gas plant. Well intervention activities did not improve the gas flow rate,” Beach said.
A reserves revision will be included in Beach’s reserves and resources statement to be released with the FY24 results.
In the Bass basin, Beach expects a A$250-A$275mn impairment as its Trefoil, Bass, White Ibis, and Yolla West discoveries did not meet minimum investment requirements. “As a result, development planning on these opportunities has ceased. Alternate usage for Beach’s Bass basin infrastructure will be investigated in parallel with restoration planning,” the company said.
The total write-down for FY24 will now exceed A$1.1bn, with Beach having already announced a A$721mn impairment in February against the value of its Cooper basin assets.
Beach is also 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.