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SA oil and gas companies report tough start to FY21

Business

Adelaide-based oil and gas companies Beach Energy and Cooper Energy have reported massive drops in profits for the first half of the financial year, citing low prices and investments in new projects for their lacklustre performances.

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Beach Energy’s net profit for the first half of the 2021 financial year more than halved to $129 million compared with last year’s figure, on the back of a 38 per cent slump in realised oil prices.

The price decrease due to the coronavirus pandemic also led to a 22 per cent fall in sales revenues to $705 million, despite production levels being maintained at 13.4 million barrels of oil equivalent (mmboe) for the half.

The Adelaide-based company’s realised oil prices fell to $64.90 per barrel compared with $104.60 in the first half of FY20. However, its average realised gas price grew by 2 per cent to $7.17 in the same period.

With a market capitalisation of about $4 billion, Beach is the state’s fourth-largest publicly listed company behind Santos, Argo Investments and Oz Minerals.

The reported 54 per cent fall in NPAT was partially offset by a 7 per cent fall in operating costs, lower royalty payments due to the lower oil price and reduced taxation as a result of a lower profit.

About 54 per cent of Beach Energy’s production for the half was gas, oil accounted for a third with other liquids accounting for the remainder.

During the six months to December 31, Beach achieved a Final Investment Decision for the 250 terajoule (TJ) per day Waitsia Gas Project Stage 2, which it says will allow it to enter the global LNG market in 2023.

It also announced two bolt-on acquisitions during the downturn, including Senex Energy’s Cooper Basin portfolio and Mitsui’s Bass Basin assets.

The company’s Western Flank oil production was up about 8 per cent on the corresponding period following the FY20 drilling program, which saw 27 horizontal oil wells drilled across the Western Flank oil fields. But higher than expected decline rates in a number of these wells were observed, sparking an investigation to inform the optimum production strategy.

Beach Energy Managing Director Matt Kay said the company’s first half was one that delivered key milestones across the portfolio despite the under-performance of the Western Flank oil fields.

“When you take stock of what has happened in the past six months, it’s extremely pleasing to see we have well and truly set the foundations for growth,” he said.

“It’s not every day you can look back at a half and say you reached FID at an LNG project the scale of Waitsia, delivered a material liquids-rich gas discovery in the Otway Basin and executed two value-accretive acquisitions.”

“Growth is happening at Beach and it’s happening across our strategically diverse portfolio of assets.”

Beach Energy will pay a 1 cent dividend per share on March 31.

The company’s share price reached $2.16 about 12 months ago before falling to as low as $0.97 in late March and recovering to touch $2 again last month.

Beach shares opened at $1.68 this morning.

Fellow South Australian oil and gas company Cooper Energy has announced an underlying loss after tax of $17.4 million for the first half of FY21.

The result came despite an 82 per cent increase in sales volumes to 1.2 mmboe and a 24 per cent increase in sales revenue to $48.6 million for the six-month period.

However, in its announcement to the ASX yesterday, the company said it had recorded a $7.6 million expense for APA’s share of revenue from gas produced at the Sole gas field and sold on the spot market and a $3.1 million expense for Cooper’s share of associated operating costs.

It also spent $11.2 million on reconfiguration and commissioning works at the under-performing Orbost Gas Processing Plant.

These costs are expected to be materially lower in the second half of the financial year.

Cooper Energy managing director David Maxwell said 2020 was a challenging year but it had been an encouraging start to 2021.

“Signing the transition agreement with APA and subsequent reconfiguration of the Orbost Gas Processing Plant were crucial milestones during the first half of FY21,” he said.

“This enabled us to commence supply under our Sole gas sales agreements, providing a material uplift in sales volumes, realised pricing and cashflow.”

Cooper Energy shares were trading at $0.30 this morning, almost half of its $0.55 per share price 12 months ago.

Santos yesterday reported before tax impairment charges of  $971 million ($US756 million) due to lower oil price assumptions.

It also reported an impairment of goodwill of $125 million ($US98 million) as a result of its Reindeer reserves revision in Western Australia.

Santos will release its full-year results on Thursday.

Meanwhile, mining giant BHP this morning reported an attributable profit of $4.98 billion ($US3.88 billion) for the half-year ended December 31, down on the $6.25 billion ($US4.87 billion) profit for the same period in 2019.

The 20 per cent decline in attributable profit reflected a more than $1.3 billion ($US1 billion) impairment charge on its NSW thermal coal assets in part reflecting softer “current market conditions for thermal coal”. This and other coal assets are up for sale.

But excluding the charge, underlying earnings rose a solid 16 per cent to $7.8 billion ($US6 billion) on the back of a stellar performance in its iron ore and copper divisions.

BHP’s South Australian copper/gold/uranium mine at Olympic Dam returned an annualised profit for the half-year of $100 million ($US78 million), a major turnaround from the $83 million ($US65 million) loss it reported for the half-year ended December 31, 2019.

It was the SA mine’s best production half in five years.

The BHP board announced a record half-year dividend of $1.30 ($US1.01) per share.

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