BPT - Beach Energy

[Dona Ferentes]

$1.18 off a low of $1.14 on the update

Beach Energy dived 10 per cent as it will record a $674m ($474m after tax) impairment in its 2025 financial year results, driven by lower commodity prices.

The company still expects the Waitsia Gas Plant to come online by the end of the September quarter.

 

[Dona Ferentes]

$1.18

“Sales volumes rose 16% year-on-year to 24.7 MMboe, supported by higher production and five Waitsia LNG cargoes. The LNG cargoes delivered revenue of $352 million and contributed to a 13% increase in total sales revenue to $2.0 billion.
“Underlying EBITDA increased 20% year-on-year to $1.1 billion and underlying NPAT increased 32% to $451 million. Pre-growth free cash flow of $657 million enabled the Board to declare a record fully franked final dividend of 6.0 cents per share, bringing total FY25 dividends to a record 9.0 cents per share."

FY26 guidance
• Production: 19.7 – 22.0 MMboe
• Capital expenditure: $675 – 775 million; abandonment expenditure: $200 – 250 million

 

[finicky]

Haven't been able to bring myself to add, but Beach up 4% so far today. The weekly chart looks pretty bad but when you zoom out to a decade monthly chart there remains to my eye the possibility of a 'cyclical' downtrend waiting for turnaround sentiment, i.e not too bad looking.

Held
Possible add

MONTHLY

 

[finicky]

Beach Energy (BPT) +3.51% lifted after tripling its second-half dividend payout to 6 cents per share despite posting an annual loss and providing weaker than expected production guidance for FY26.

 

[qldfrog]

Beach Energy (BPT) +3.51% lifted after tripling its second-half dividend payout to 6 cents per share despite posting an annual loss and providing weaker than expected production guidance for FY26.

So paying more when earning..nothing...after costs and doing worse next year..
I really would like to get more but sorry..no

 

[finicky]

@qldfrog

held
Holding

Fat Tail Investment Advisory
Tuesday, 5 August 2025
Wollongong, Australia
By Greg Canavan

Dear finicky,

Before going to the portfolio review video, I want to provide an update on Beach Energy [ASX:BPT].

Its share price fell sharply last week following the release of its fourth-quarter production update. This continues its run of disappointing investors over the past few years.

The question is, do we stick with this underperformer or continue to hold?

Here’s how to think about these types of investments…

Firstly, resist the urge to make an emotional decision. Emotional decisions generally provide opportunities to the investor on the other side of the trade. So if you’re dumping a stock in disgust and frustration, you could be giving someone a long-term winner.

Secondly, the company should be assessed like any other investment. Has the thesis changed? Is there value there? What are the alternatives to remaining invested?

Let’s consider those questions now. You don’t have to own Beach to learn something here. This applies to any company that has provided a frustrating investment experience.

So what was behind the latest share price decline?

Beach flagged a $674 million asset writedown across its Cooper Basin ($487 million) and Perth Basin ($181 million) assets, largely due to ‘lower commodity prices’.

In addition, while the Waitsia LNG project is now in the commissioning phase and first gas is imminent, the ramp-up to full production looks like it will take longer than the market expected (again).

On the other hand, the FY25 results released on Monday showed solid operational improvement. Gross margins expanded from 27% to 32.6%, indicating a strong cost performance.

Indeed, Beach reduced unit field operating costs by 18% to $12.80 per barrel of oil equivalent in FY25.

Production increased 9% to 19.7 million barrels of oil equivalent (MMboe) with sales volumes up 16% to 24.7 MMboe. Operating cash flow of $1.1 billion saw Beach reduce debt by a net $215 million, and announce a final, fully franked dividend of 6 cents per share, bringing total dividends for the year to 9 cents.

So operationally and financially, performance was solid in a weak commodity price environment. But it was overshadowed by asset writedowns, driven largely by the commodity price cycle.

All up then, I’d suggest the result was better than the market’s initial response indicated. But in the context of Beach’s serial disappointments, and constantly putting the wait into the Waitsia LNG project, the sell-off was not surprising.

And FY26 guidance was weaker than expected given the slower ramp up of Waitsia. It will likely take until the end of the year for the plant to reach 90% operating capacity.

Production forecasts of 19.7 to 22 MMboe suggests growth of 0–11%. Given that range depends on the Waitsia ramp-up, this is hardly exciting.

Still, with the cost base now reset under new CEO Brett woods, that should translate into another year of strong free cashflow.

Apart from Waitsia (a long life asset), there isn’t much in the way of growth assets in Beach’s portfolio. In recent years, significant investment in the Otway Basin led to a 64% production increase in FY25. But this is expected to decline 20% in FY26 due to natural field decline.

Otway will continue to be a major producer, but it needs ongoing investment to do so.

This is why Beach will be very interested in Santos’ [ASX:STO] domestic gas assets. Beach is currently in a JV with Santos in the Cooper Basin (where Santos is the operator and majority owner). Beach would be very interested in acquiring that asset.

Given the strong cashflow attributes of its current assets and low debt levels, Beach is in a position to bid for Santos’ domestic assets should the government have issues with the foreign bidders taking control of them.

So, there is now the spectre of a potential capital raise to consider. Given the weak share price, this is not the environment you want to issue equity in.

Longer term, ownership of some of Santos’ assets would establish Beach as a major player in the domestic gas market, with critical processing infrastructure. But what price will it pay to get there? That’s the big question.

To sum up then…

Beach is now operationally efficient and generating strong cashflows. Waitsia has been poorly managed, but most of the issues now appear to be behind it. The rest of the asset base is decent but needs ongoing investment to maintain production.

In short, Beach is a decent business but not a high-quality one. That’s reflected in the forecast return on tangible assets over the next few years of 12–13.5%.

But the market is pricing it as a low-quality business. It trades at a 15% discount to book value. Based on my analysis, it should trade at a slight premium.

My estimate of intrinsic value is much less than I had previously calculated. That’s due to the asset writedown and FY26 earnings per share forecasts falling 35% from the start of this year.

On the flipside, those forecasts are much more conservative. My guess is the earnings downgrade cycle is probably over (barring a fall in oil and gas prices).

For example, there is a 50/TJ a day legacy gas contract that ended for the Cooper Basin JV in FY25. That gas will now be sold at much higher levels so there is some upside there.

And, of course, the ongoing tightness in the domestic gas market is a structural tailwind for Beach. If it can build its position here, its strategic value will be much greater than what the market is currently giving it value for.

So while I don’t see Beach as a great business, the risk/reward equation remains favourable. It would be the wrong call to dump it here.

At current prices, if it (finally) hits its forecast numbers, Beach should deliver investors a return well in excess of cash (which you would be earning if you sold).

So continue to hold if you own it and buy if you don’t. The portfolio has a 3% weighting. With a solid foundation now in place, FY26 could be the year that Beach finally delivers.

Beach will trade ex-dividend (6 cents) on 28 August.

For a review of the rest of the portfolio, click on the image below…

Fat Tail Investment Research

***

 

[qldfrog]

Point taken

 

[Smurf1976]

From a trading perspective about the best I can say for this one is price is relatively low from an historic perspective and has tended to bounce from only slightly lower than present levels in the past:

 

[finicky]

@Smurf1976 I agree with this and until shown otherwise I am assuming the price is in a sideways range over the last 4-5 years. Will be considering an add if it gets down around $1, where I'm making the assumption it would hold (if it gets there).
I've lazily taken Greg Canavan's guidance that eps will be 35% lower for FY26 (but generating plenty of cash) so that would imply to me a dividend 35% lower, being conservative, which is 6c (FY24 was 9c). Six cents fully franked is a 6% dividend yield on a $1 share price or a 5% yield on the current $1.20 s.p. So paid well to wait for FY27 and beyond. And they might even raise the payout to reward the sticky shareholders or because eps surprises to upside. Well worth the risk in my sentiment.

Held
Holding, possible add.