COMPANY NEWS & UPDATES
Beach Energy Limited ( BPT )
Accumulate Valuation $ 2.65
Earnings Forecast
Yr to June |
2020A |
2021F |
2022F |
|
Sales Revenue
($ M )
|
1,654.9 1,481.3 |
1,736.9 |
|
Reported
Profit ($ M )
|
540.0 |
357.8 |
419.0 |
EPS ( c ) |
23.6 |
15.6 |
18.3 |
Div ( c ) |
2.0 |
2.0 |
2.0 |
P / E ( x ) |
8.7 |
9.2 |
7.8 |
Yield (%) |
1.0 |
1.4 |
1.4 |
Franking (%) |
100 |
100 |
100 |
|
EPS Growth
(%)
|
-2.3 |
-33.8 |
17.2 |
* Profit & EPS adjusted for options , goodwill , notional earnings and nonrecurring items .
1 st Quarter Update
We keep our $ 2.65 valuation for Beach Energy . The firm reported flat first quarter fiscal 2021 production of 6.8 million barrels of oil equivalent , or mmboe , marginally below expectations . Higher output from the Otway and Cooper Basins was offset by lower Western Flank and BassGas volumes . Sales revenue grew 13 % on the prior quarter to A $ 361 million , with the realised oil price increasing 38 % to AUD 65 per barrel as energy markets recovered from earlier impacts of COVID-19 .
Our fiscal 2021 EPS forecast is little changed at $ 0.16 , and there are no read-through implications for our longer-term forecasts . Beach maintains all fiscal 2021 guidance including production of 26.0- 28.5mmboe and underlying EBITDA of $ 900 million- $ 1,000 million . We still forecast a guidance high-end 28mmboe and $ 995 million respectively . Beach remains favourably unleveraged , though only just , with wafer-thin period-end net cash of $ 9 million . However , that ' s after first quarter spending of $ 135 million on exploration and development .
Full year expenditure guidance remains $ 650 million- $ 750 million with Beach gearing up for drilling campaigns at Enterprise 1 in the Otway Basin underway and Ironbark 1 in Western Australia , in addition to more development work at Waitsia . Drilling continues to deliver for Beach , the firm participating in 17 predominantly Cooper Basin development wells in the first quarter with a 94 % success rate .
The Enterprise 1 well in Victoria will target additional gas feed for the Otway gas plant , an additive enterprise . But the BP operated Ironbark 1 has the potential to garner greater interest--it ' ll be the deepest offshore well drilled in Australia and the first operated by BP in over a decade . It targets 15 trillion cubic feet of gas or 170mmboe in multiple objectives just 50km from the North West Shelf ' s North Rankin platform . Interest in a potential gas find is likely to be considerable and Beach has a useful 21 % stake .
At Beach ' s 50 % Waitsia gas field , an expanded Xyris gas facility began gas deliveries in August , following completion of the Stage 1 expansion . The facility is now capable of producing at 20 TJ / d , Beach ' s share equating to 0.6mmboe annually . And the company has newly signed a nonbinding gas processing term sheet with the North West Shelf joint venture for the processing of Waitsia gas at an LNG production rate of 1.5 million tonnes per annum , or Mtpa , from late calendar 2023 . A final investment decision for Waitsia Stage 2 development remains on track for the December 2020 quarter , aiming to fully maximise field potential via a new 250TJ / day processing plant , equivalent to around 1.6Mtpa of LNG .
An expanded Waitsia is already built into our model and comprises around 8 % or $ 0.20 per share of our Beach fair value estimate . But the LNG sales angle is interesting , building on Beach ' s Cooper Basin gas already being exported via Santos ' Gladstone LNG . Becoming more embedded in third-party export processing streams adds to Beach ' s appeal , though not to sufficiently material an extent to move our no-moat rating . However , the more important Beach becomes to third party revenue streams , the greater its potential takeover appeal .
At around $ 1.35 Beach shares remain materially undervalued . After stripping out an $ 300 million lumpsum for the Beharra Springs Deep discovery , our $ 2.65 valuation equates to a 2025 EV / EBITDA exit multiple of 3.5 , suitably lower than for larger peers , in keeping with Beach ' s lesser roughly 10-year average reserve life . We assume healthy five-year EBITDA CAGR of 10.8 % to $ 2.1 billion by fiscal 2025 , on production growth to 40mmboe and Brent crude price recovery to a midcycle USD 60 per barrel . Continued energy price recovery from COVID-19-impacted lows is the key potential catalyst for share price re-rating to fair value .
Page 13 of 21