Beach Energy holds back oil, gas targets as price curbs cloud projects

Beach, which is pursing gas projects in Victoria’s offshore Otway Basin, said the eastern seaboard “desperately needs as much gas as it can get”.

In Western Australia, the collapse of engineering contractor Clough in December caused a construction slowdown on the second stage of the Waitsia field, where Beach Energy and Japan’s Mitsui are aiming to develop gas to export as liquefied natural gas (LNG).

“Our industry today is experiencing a dynamic regulatory environment where the rules of the game are frequently changing.”

Beach Energy chief executive Morné Engelbrecht

Italian building giant Webuild has since struck an agreement with Clough’s administrators to purchase the company’s Asia Pacific projects for around $39 million, including Waitsia.

Beach’s Waitsia project had been initially due to start producing LNG for export via the Woodside-led North West Shelf LNG plant near Karratha in the second half of the 2023 calendar year. Following the deal with Webuild, Engelbrecht on Monday said Beach now anticipated gas to start flowing by the “end of 2023”.

“Our agreement with Webuild to complete the Waitsia Stage 2 project is particularly welcome news,” he said. “Webuild and the Waitsia joint venture are now planning for first gas from the Waitsia Gas Plant by the end of 2023.”

Analysts on Monday said the development problems at Waitsia now appeared less damaging than initially thought.

“In our view, this is the best outcome for Beach because this agreement should allow the Waitsia Stage 2 project development to be completed without the major disruption that may have occurred if the project ground to a complete halt and another new entity took it over,” Royal Bank of Canada analyst Gordon Ramsay said.

Despite reporting a profit decline, Beach boosted its interim dividend to 2¢ a share, double its payout from a year earlier, and introduced a policy of returning 40-50 per cent of pre-growth free cashflow to shareholders.

UBS analyst Tom Allen said lower production and higher costs for the 2023 financial year had already been priced in. “Investor focus will be the new distribution policy announced, providing a clear path to a step change in fully franked distributions and how the board will balance growth versus shareholder returns going forward,” he said.