Beach targets A$28m cost savings after Drillsearch merger

PERTH (miningweekly.com) – ASX-listed Beach Energy has identified A$28-million in cost savings following the successful takeover of Drillsearch Energy earlier this year, with the company saying on Thursday that 56 staff would be made redundant by April, with further staff cuts likely to follow.

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.

Since business integration started, Beach had identified a number of cost-cutting initiatives, including the redundancy of the majority of Sydney-based employees, the cessation of Drillsearch board fees, the termination of contractors and consultants and the redemption of convertible notes.

Beach noted that in conjunction with the merger integration, a review of the company’s organisation structure was also completed, which concluded that Beach had been operating with a lean structure and top-quality staffing metrics.

However, a number of changes were recommended to assist with the current environment of low oil prices, and the integration of Drillseach.

Beach said that these recommendations were being implemented, and would allow the company to absorb the majority of the Sydney-based workload into its existing resource levels.

“Results from the early stages of integration clearly support the rationale for merging Beach and Drillsearch,” said Beach acting CEO Neil Gibbins.

“The previous joint ownership of our flagship Western Flank oil and gas permits presented a unique opportunity to rationalise the operation of these assets. Pleasingly, it has become clear that the existing Beach resource levels are capable of operating the combined portfolio of assets.

“This has allowed us to accelerate our cost-out initiatives, with our initial synergy estimate already exceeded,” Gibbins said.

Beach told shareholders that the merger synergies had exceeded original expectations, and would be fully realised by the 2017 financial year.

Meanwhile, the company would also focus on adapting its operational processes and procedures in response to the low oil prices, implementing cost saving initiatives at its operations to mitigate revenue declines.

The initiatives would include reducing field contractors, re-tendering of various supply and service contracts, consolidating field camps and trialling drag-reducing agents to increase pipeline throughput across the company’s network.

Furthermore, a detailed review of Drillsearch’s legacy assets, operations and capital expenditure was also under way.