Beach Energy shares drop on strategic review outcome
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More news: Shares in Beach Energy have dropped more than 3% to $1.51 after the troubled oil and gas producer outlined plans to slash costs following a strategic review.
The group is targeting a 20% reduction in sustaining capital expenditure in FY25, a 30% cut in unit field operating costs, and will raise the bar on returns for projects as it looks to overcome rising costs and delays at key projects.
Beach Energy targets cost cuts, divestments in strategy reset
The news: Oil and gas producer Beach Energy says it will target a 20% reduction in capital and operational costs and potential divestment of non-core assets following a strategic review.
The numbers: The group is targeting a 20% reduction in sustaining capital expenditure in FY25 to $425 million to $475 million, from $525 million to $575 million in FY24. It is also aiming to cut unit field operating costs by 30% to less than $11/barrel of oil equivalent by way of job cuts, organisational and contracting efficiencies and higher production.
Overall, this will target reducing its breakeven oil price to USD30 ($45.3) a barrel in FY25, a 45% reduction from the current breakeven price of USD54 a barrel.
The context: Beach said it already achieved a 23% headcount reduction as well as completed operating cost and capital reductions of $135 million.
The strategic review followed recent troubles for the company in a volatile price environment. Beach, 30% owned by Kerry Stokes’ Seven Group, outlined job cuts in March following a hefty half-year statutory loss.
The group has written down the value of its Cooper Basin producing assets, New Zealand assets and the Bass Basin asset in recent months. It has also been beset by delays at its key Waitsia project in the Perth Basin.
Beach has identified the New Zealand, Bass Basin and onshore assets in South Australia as non-core, and said it would selectively invest capital in these and consider the potential for divestments.
The source: ASX announcement
