Beach Energy shares lift on Q1 sales growth despite Hercules well setback
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The news: Oil and gas group Beach Energy saw its shares lift in morning trade after reporting an uptick in sales volumes and revenue for the first quarter.
The numbers: Beach shares were up 3.7% to $1.13 at midday AEDT, having lowered 9.6% over the last 12 months.
The company reported Q1 production of 5 million barrels of oil equivalent (MMboe), up 8% quarter on quarter, but down from 5.2 MMboe in the prior corresponding period.
Sales volumes totalled 6.8 MMboe, up 15% quarter over quarter, while sales revenue climbed 18% to $537 million.
The context: Beach's managing director and CEO Brett Woods said the company enjoyed a "strong start" to the financial year, with increased production and two LNG cargoes lifting at its Waitsia site in Western Australia.
Less positively, Beach's Hercules gas exploration well in the Otway basin was plugged and abandoned after the end of the quarter. Woods said the well was a "moderate to high-risk target and failed to intersect hydrocarbons."
RBC Capital Markets analyst Gordon Ramsay said the sales result was "materially higher than expected", benefitting from the addition of two Waisia LNG cargoes, with RBC forecasting only one. Production volumes were also above consensus estimates, according to Visible Alpha data.
Ramsay said the abandonment of Hercules is set to cost Beach around $50 million. The well had been expected to fill up Beach's Otway gas plant, he noted.
What they said: "Overall, materially higher than expected sales revenue has helped offset the poor news on Hercules and potential for slightly higher costs at Waitsia," said Ramsay.
The sources: ASX, RBC Capital Markets research
