BPT 1.16% $2.61 beach energy limited

bpt interim results

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    A more than doubling in half year net profit after tax to A$58.8 million on the back of record revenue and significant gains in oil production have been announced by Beach Petroleum Limited (ASX code “BPT”).

    The leading Australian energy group used the release today of its accounts for the latest half year to flag even greater growth expectations in the current second half of 2007-08. Beach grew after tax earnings 148% for the six months to 31 December 2007 to $58.8 million compared to $23.7 million in the corresponding 2006/2007 half-year.

    Revenue was driven 30% higher to a record $340.0 million first half compared to $261.9 million previously - with 16% higher sales proceeds contributing a record $249.2 million of that total, up from $214.4 million in the six months to December 31, 2006.

    Production
    The Company’s oil and gas production is derived from the Cooper and Eromanga Basins (northeastern South Australia and south-western Queensland), the Surat Basin (eastern Queensland) and the Gippsland Basin (offshore Victoria).

    Production for the half-year totalled 4,583 thousand barrels of oil equivalent (kboe) compared with 4,696 kboe for the previous corresponding period. Oil production was up by 46% due, to increased production from the Cooper and Gippsland Basins, offset by reduced Cooper Basin gas production (down 16%) resulting primarily due to a shut-down of the Moomba plant for 11 days in December for maintenance.

    Production comprised approximately 27% oil and 73% gas/gas liquids. The Cooper/Eromanga made up 71% of Beach’s oil production with the remainder (29%) coming from the Gippsland Basin. The Cooper Basin also made up 94% of Beach’s gas production with 6% from the Surat Basin.

    Directors declared a steady interim dividend of 0.75 cents per share.

    Strong underlying profitability
    “Clearly, we have demonstrated the Company’s strong production profile and equally a demonstrably strong underlying profitability in operations,” Beach Petroleum Chairman, Mr Robert Kennedy, said today.

    “This ethos has been built on well executed acquisitions, a suite of cashflow generating production assets and a self funded exploration success rate able to materially grow production and reserves.

    “This success includes an ability to constrain costs in a tide of rising costs and to deliver projects within or under budget.

    “Yet, while we have worked hard over the past two years to develop key major new projects which underpin this current financial strength and ability to grow, such projects will not in themselves define the Company’s future completely.”

    Mr Kennedy said Beach had therefore embarked this year on its most extensive and largest scale exploration program ever, based on focused opportunities domestically and internationally best able to deliver diversity and upside and therefore growth in reserves, production and cash flow.

    Beach Petroleum earlier today added to its acquisition war chest with the announcement of the A$123 million sale to the Sojitz Corporation of 10% of Beach’s interest in the Basker, Manta, Gummy (BMG) oil, gas and condensate project in the Gippsland Basin.

    The sale, which helped Beach realize further substantial profits on its investment in the project after an initial equally sized sale of a 10% interest last year to Itochu, means Beach retains a 30% exposure to the increasingly successful BMG operation project.

    Cooper Oil Program “exceptional”
    Beach Petroleum’s Managing Director, Mr Reg Nelson, said the Company was particularly pleased by the performance of its core production assets, in particular Cooper oil exploration and production.

    “The success of the Cooper oil program on many fronts during the period clearly demonstrates the exceptional economics of the region and emphasises why it will continue to play a significant place in Beach’s future production profile,” Mr Nelson said.

    “Value-adds will come from the near-field exploration and development activities operated by Santos on behalf of the Cooper Basin Joint Venture; and the newer frontier exploration work operated by Beach on behalf of other joint ventures. Both operations are on track and producing results material for Beach.”

    Operations Update

    Cooper & Eromanga Basins
    During the period the Company participated in the drilling of 70 wells in the Cooper & Eromanga Basins.

    • Parsons-1 (PEL 92, Beach 75%) made a new field oil discovery approximately 10 km west of the Christies oil field. The well encountered a 12m gross oil column at the top of the Namur Sandstone and flowed oil after completion at 3,362 barrels of oil per day through a 2” line. The well is now cased and completed as a future oil producer. Production is expected to commence in the second quarter of 2008.

    Beach assesses the recoverable oil reserves in the Parsons Field to be:
    p90 (Proved) 1.4 million barrels
    p50 (Proved & Probable) 1.9 million barrels
    p10 (Proved, Probable & Possible) 2.6 million barrels

    • Three successful appraisal wells were drilled in the Callawonga oilfield (PEL 92, Beach 75%), lifting developed 2P reserves by approximately 1.0 million barrels, net to Beach.

    The success of these wells allowed for a 47km oil pipeline from the Callawonga field to the head of the Tantanna-Moomba pipeline to be installed in the period late October-December, with commissioning expected by mid March 2008. The pipeline will have the capacity to transport oil at rates of up to 5,000 bopd, from the Christies, Callawonga and Parsons Oilfields. This may be supplemented by trucking if production capacity exceeds this level. (Crude from these fields is currently transported by truck to Tantanna and then by pipeline from there to Port Bonython, via Moomba).

    • 49 of the 70 wells drilled during the period were associated with the Cooper Oil

    Beach expects that the results of this program will add approximately 1.4 million barrels to its 2P reserves.

    • 11 gas development wells were drilled in the Cooper Basin.

    During 2008 Beach expects to participate in 73 wells associated with the Cooper Oil Project.

    Gippsland Basin - BMG Project (Beach 30%)
    On 9 August 2007, Beach announced the sale of a 10% interest in the BMG project to Itochu Corporation for $123 million, subsequently reducing Beach’s interest from 50% to 40%. The effective date of the sale, which was completed on 5 October, was 1 June 2007. This transaction represented the sale of 3.9 mmb of Proved and Probable oil reserves at a price of $31.54/barrel.

    On 29 February 2008, Beach announced the sale of a further 10% interest in the BMG project for $123 million to Sojitz Energy Australia Pty Limited, which will reduce Beach’s interest from 40% to 30% effective 31 December 2007. This transaction represents the sale of 3.7 mmb of Proved and Probable oil reserve.

    Surat Basin - Tipton West Project (Beach 40%)
    Gas production from the Tipton field continued to ramp-up during the period with gas production levels approaching 20 mmcfd and water production flattening at approximately 30,000 bwpd. During the period 7 further development wells were drilled.

    Production from two pilot projects, Taroom North and Taroom South, commenced during the period. Results to date are above expectation with rates of approximately 2 mmcfd being achieved at end December 2007.

    On 16 January 2008, the results of a review of Tipton West reserves by Netherland, Sewell & Associates Inc were announced. This review resulted in Proved reserves increasing by 570% to 167 PJ and Proved and Probable reserves increasing by 68% to 293 PJ. These reserve increases, which have arisen from the results of development drilling and field production performance, represent an increase of 48 PJ (8.3 mmboe) to Beach's Proved and Probable reserves.

    Taranaki Basin - offshore New Zealand
    In August 2007, Beach announced that it had entered into a farmin agreement with AWE (NZ) Pty Ltd in relation to PEP 38482 (offshore Taranaki Basin, New Zealand) under which Beach would earn a 20% interest by participating in the Kopuwai-1 exploration well.

    Kopuwai-1 spudded on 29 September 2007 and reached its total depth of 4,052m on 14 October 2007. The well intersected an oil accumulation which is too small to develop. The results of Kopuwai-1 are being utilised to re-assess the remaining prospects and leads in PEP 38482.

    Bass Basin - offshore Tasmania
    In August 2007, Beach announced that it had entered into two farmin arrangements in relation to T/38P and T/39P (offshore Bass Basin, Tasmania).

    • Beach will earn an 80% interest in a defined portion of T/38P by participating in Spikey Beach-1, to be drilled in the second half of 2008.
    • Beach will earn a 50% interest in T/39P by participating in Peejay-1, to be drilled in the second half of 2008.

    International

    Spain
    In November 2007, Beach entered into a farmin agreement through which it will acquire a 25% interest in four onshore tenements in the Ebro Basin, Spain by participating in 2D seismic acquisition, which commenced in October 2007.

    The Ebro Basin lies in north-eastern Spain, south of the Pyrenees Mountains which separate it from the prolific Aquitaine Basin in south-western France.

    Albania
    In December 2007, Beach entered into a farmin agreement with a subsidiary of Island Oil and Gas Plc under which Beach will acquire a 25% interest in the “Durresi Block”, in the Adriatic Sea, offshore Albania.

    The Durresi Block covers an area of 4,200 square kilometres along the Adriatic coast of Albania. It contains an unappraised gas/condensate discovery and several undrilled oil and gas prospects and leads. Although initial exploration will focus on relatively low risk/reward targets in shallow water and close to shore, Beach considers that subsequent exploration, which will target deeper
    water prospects, will have the potential to yield reserves in excess of 100 million barrels of oil equivalent (net to Beach). This western portion of the tenement contains the extension of a trend which is currently the focus of renewed exploration and licence activity in the adjacent Italian offshore region.

    The 2008 exploration program is expected to consist of seismic acquisition, followed by the drilling of one well in 2009.
 
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