Beach reports record quarter, helped by Drillsearch merger

JOHANNESBURG (miningweekly.com) – Oil and gas company Beach Energy, which recently merged with Drillsearch, increased its production by 13% quarter-on-quarter in the June quarter, producing 2.72-million barrels of oil equivalent in the three-month period.

The company sold 3.10-million barrels of oil equivalent, a 17% increase on the March quarter, generating revenue of $166.6-million, or 39% more than in the previous quarter.

“Record quarterly production and sales volumes were achieved, thanks to our successful merger with Drillsearch and various production optimisation initiatives in the field,” CEO Mat Kay said in a statement on Thursday.

For the full-year ended June 30, Beach Energy produced 9.66-million barrels of oil equivalent and sold 10.86-million barrels of oil equivalent for revenue of $558-million.

The company generated $45-million of free cash flow in the June quarter and increased its cash reserves by $29-million over the past year, despite lower oil prices. “This demonstrates the robust nature of our low-cost Western Flank operations, our diligent focus on reducing costs across the business and our approach to capital allocation,” Kay added.

Beach has set a capital expenditure (capex) guidance of between $180-million and $200-million for the 2017 financial year, which the firm said was “appropriately sized for the current oil price environment”.

Of the total capex budget, 55% is discretionary expenditure on projects and the balance is stay-in-business capital.

Beach allocated about two-thirds of its discretionary capex budget of between $100-million and $115-million to the Western Flank oil and gas assets, with the remainder allocated to the South Australian Cooper Basin (SACB) and South West Queensland (SWQ) joint ventures.

The 2017 capex for the SACB and SWQ JVs, which Santos manages, has been trimmed by about 35% on the 2016 financial year’s capex and by 65% compared with the 2016 financial year.

The capex for SACB and SWQ only accounts for 42% of Beach’s total capex in 2017, compared with 66% of its total spend in 2016.

Beach reported that its production volumes in 2017 would exceed 2016’s, setting a guidance range of 9.7-million to 10.3-million barrels of oil equivalent.

Beach, at the beginning of March, concluded a A$384-million merger with Drillsearch, under which Drillsearch shareholders were offered 1.25 Beach share for each of their Drillsearch shares.