Quarterly production broadly steady at 6.8 MMboe as revenues increase by 13%
Q1 FY21 production of 6.8 MMboe was 1% below the prior quarter, with higher output from Victorian Otway Basin and Cooper Basin JV offset by lower Western Flank and BassGas volumes.
Q1 sales revenue of $361 million was 13% up on the prior quarter as realised oil price increased by 38%.
Beach ended the first quarter with $9 million net cash and access to $459 million in liquidity.
Key drilling activity in December 2020 quarter with Enterprise and Ironbark exploration wells
The Enterprise 1 exploration well spudded on 1 October and is expected to complete drilling in the December 2020 quarter.
The Ironbark 1 exploration well is expected to spud late October, with drilling results expected in the March 2021 quarter.
An agreement was executed with Diamond Offshore for the use of the Ocean Onyx rig for the Victorian Otway offshore drilling program.
Waitsia stage 1 expansion complete, continued progress towards Waitsia stage 2 FID in Q2 FY21
Non-binding gas processing term sheet signed with the North West Shelf joint venture for the processing of Waitsia gas and production of ~1.5 million tonnes per annum of LNG from late calendar 2023.
FID of Waitsia stage 2 expansion remains on track for the December 2020 quarter.
Expansion of the Xyris Facility was completed in September, with the facility now capable of producing at 20TJ/d.
A sound start to FY21 as offshore exploration ramps up and revenues lift
Steady portfolio production, the commencement of an offshore exploration program in the Otway Basin, and an increase in revenues highlighted a sound FY21 First Quarter Report for Beach.
Beach recorded production of 6.8 MMboe for the first quarter largely due to higher production from the Victorian Otway Basin and the Cooper Basin JV resulting in a 3% increase on the corresponding quarter last year.
Realised oil prices increased by 38% in the first quarter which led to a sales revenue increase of 13% on the previous quarter to $361million.
Beach Energy Managing Director and CEO, Matt Kay, said the First Quarter Report showed Beach had delivered a very steady start to the financial year.
In a period when the world has been anything but normal, Im very pleased to see a great level of stability from our diverse portfolio of production assets, Mr Kay said.
It was a quarter in which production met expectations, demonstrating that our team can continue to operate effectively during what has been a period of high disruption particularly in Victoria.
Sales revenues were up 13%, and Beach continues to operate in a net cash position, ensuring we remain in a robust position heading into the second quarter.
The results set Beach up nicely as we head into an exciting period with the drilling of two exploration prospects, Enterprise 1 in the Otway Basin and Ironbark 1 in the Carnarvon Basin and plans to reach FID on Waitsia Stage 2 by the end of the calendar year.
Drilling has already commenced at the Enterprise 1 onshore-to-offshore well in the Victorian Otway Basin and operator BP is expected to spud the Ironbark 1 frontier exploration well in the coming days.
The drill bit continues to perform for Beach, as we participated in 17 wells with a success rate of 94%, including 6 gas exploration wells at an 83% success rate.
On the operational front, our facility reliability was above 97% for the quarter and we saw the expansion of the Xyris Facility completed in September, with the plant now capable of producing at 20TJ/d.
Quarterly sales volume of 6,977 kboe were down 155 kboe on the prior quarter. Lower oil sales volumes resulted from lower production and timing of shipments. Higher Condensate sales volume was a result of timing of shipments. Sales gas and ethane sales volume was in line with production.
Total sales revenue of $361 million was 13% higher than the prior quarter, driven by higher LPG and condensate sales volumes and higher realised liquids pricing, as energy markets recovered from the earlier impacts of COVID-19 in Q4 FY20. Sales gas and ethane revenue was down 5% for the quarter, driven by lower realised prices.
Average realised price
Average realised pricing across all products was $51.8/boe, an increase of 16% on the prior quarter, primarily due to higher realised liquids prices. Average sales gas and ethane pricing was 5% lower due to contract mix for the quarter.
First quarter capital expenditure was $135 million with Beach now gearing up for commencement of both Enterprise 1 and Ironbark 1 drilling campaigns in Q2 FY21.
Beach ended the quarter in a net cash position, comprising drawn debt of $115 million and total cash reserves of $124 million. With $335 million undrawn under the $450 million committed revolving credit facility (with a maturity date of November 2022), Beach has liquidity of $459 million at the end of the quarter.
Material cash flows for the quarter included operating cash flow of $163 million which included cash tax payments of $55 million, investing cash outflow of $173 million and net financing cash inflow of $24 million comprising of $55 million in debt drawn downs and $23 million dividend payment.
Beachs capital structure as at 30 June 2020 is set out below. 525,479 of unlisted performance rights issued in 2017 and 2018 vested during the quarter, increasing the number of fully paid ordinary shares. Unlisted employee rights had a net decrease of 11,244, as 525,479 previously issued performance rights vested and 514,235 new employee rights were issued under the Beach Energy Employee Share Purchase Plan in the quarter.
Q1 FY21 group production of 6.8 MMboe was 1% lower than the prior quarter, reflecting increased production from the Victorian Otway, Kupe and Cooper Basin JV, flat production from Perth Basin and lower production from Western Flank, Bass Gas and SA Otway.
Western Flank production was 2.4 MMboe, down 6% on the prior quarter with lower gas, gas liquids and oil production through the September 2020 quarter.
Western Flank gas and gas liquids production was 511 kboe, down 10% on prior quarter primarily due to planned routine maintenance at the Middleton facility during July and August.
Gross average daily oil production from the Western Flank was 22.5 kbbl (-6%). Beach-operated assets (ex-PEL 91 and ex-PEL 92) contributed 20.4 kbbl/d down 5% on last quarter, with 18.8 kbbl/d produced from ex-PEL91.
? A total of 9 new oil wells were brought online 8 horizontal and 1 vertical producers, all 9 are on artificial lift.
? At quarter end Beach has 6 oil wells cased and completed (4 horizontal and 2 vertical) plus 3 ESP projects all scheduled to come online in Q2FY21
Cooper Basin JV production was 2.2 MMboe, 2% higher than the prior quarter. Oil production increased 14% on the prior quarter, driven by improved uptime and full quarter contribution from a recent 10 well Coorikiana oil campaign.
Perth Basin production was in line with the prior quarter at 62 kboe.
At Waitsia, the expanded Xyris gas facility commenced gas deliveries in August, following the completion of Waitsia Stage 1 expansion. The facility is now capable of producing at 20 TJ/d.
At Beharra Springs, the Beharra Springs facility remained shut in for the entire quarter awaiting the installation and commissioning of a new cyclonic separator. Subsequent to quarter end the facility was brought back online in mid October 2020. The Beharra Springs Deep well is expected to be connected in the March 2021 quarter, which will see output increase to ~20 TJ/d.
SA Otway Basin
Production from the SA Otway was 103 kboe, down 10% due to lower demand driven by downtime in major customer operations in September.
Victoria (Victorian Otway Basin and BassGas)
Victorian Otway Basin production was 805 kboe, up 11% on the prior period due to improved customer nominations following the connection of the Black Watch 1 well part-way through the prior quarter.
BassGas production was 337 kboe, down 15% from the prior quarter. Production was impacted by minor downtime in August, one well offline for two weeks in September and natural field decline.
New Zealand (Kupe Gas Project)
Kupe production was 783 kboe, 3% higher than the prior quarter.
Quarterly production was positively impacted by higher customer nominations, driven by higher winter demand for gas. Well deliverability declined during the quarter, in-line with previous guidance and expectations of field performance, ahead of the anticipated start-up of the compression project in early FY22.
Beach participated in 17 wells where drilling operations were completed all 17 in the Cooper Basin at a success rate of 94% (success defined as a well cased and suspended or completed as a future producer). Two wells were drilling ahead at quarter-end.
Highlights of the first-quarter Beach-operated Cooper Basin drilling program included:
Continuation of development drilling with the SLR Rig 184 with seven horizontal oil development wells successfully drilled on the Bauer Field. One well was drilling ahead at quarter-end.
Completion of Bauer 63 saw the end to a successful 16 horizontal development well campaign targeting the McKinlay Formation on the Western Flank.
Spudding of the first horizontal Birkhead oil well in the Bauer field. Beach has one other operated Birkhead horizontal well in the Stunsail field and is a 40% participant in PEL104 with Senex where horizontal oil wells in the Birkhead reinvigorated production in the Growler field. In the non-operated Cooper Basin JV, Beach participated in 11 wells in the quarter, at an overall success rate of 90%. Highlights included:
Six gas exploration wells drilled at a success rate of 83%, including Maverick 1 which opens further opportunities on the Northern flank of the Wackett field.
Three development wells were drilled and cased and suspended in the quarter at a 100% success rate. A fourth well, the horizontal gas development well, Yalcumma-3DW1 was commenced, however following operational issues was plugged and suspended to enable future re-entry.
Corporate and Commercial
Victorian Drilling update
On 17 August 2020, Beach announced that it had executed a new offshore drilling agreement with Diamond Offshore General Company for the use of the Ocean Onyx Semi-submersible rig. The agreement provides for the drilling of up to 9 wells (6 firm and 3 options) per Beachs Victorian Otway offshore drilling program.
In August Beach announced the signing of non-binding gas processing term sheet with the North West Shelf Joint Venture for the processing of gas from Waitsia and production of ~1.5 million tonnes per annum of LNG from late calendar 2023. FID of the Waitsia Stage 2 development remains on track for the December 2020 quarter.
Victorian Otway contract repricing update
The Origin GSA review remains on track for expected completion in March 2021 quarter, with the outcome to be backdated to 1 July 2020.
On 1 October the Enterprise 1 gas exploration well spudded in permit VIC/P42(V) in the Victorian Otway Basin. Targeting gas in the Waarre C formation, Enterprise 1 has a target measured depth of 5,155 metres. Drilling operations are expected to be completed in the December 2020 quarter.
The Ironbark 1 exploration well is due to spud late October, with a targeted measured depth of ~5500 metres. Results from the well are expected in the March 2021 quarter. The participating interests in WA-359- P Ironbark are BP Developments Australia Pty Ltd (Operator): 42.5% Beach: 21% New Zealand Oil & Gas Pty Ltd: 15% Cue Energy Resources Limited: 21.5%.
Federal Government Budget Announcement
Beach notes the recent Federal Government budget announcement regarding its plans to stimulate the economy. One of these measures will allow businesses to immediately deduct eligible depreciable assets in the year they are first used or installed and ready for use by the end of FY22. Beach is assessing the impact of this measure to near term cash flows, with expectations that it will have a positive impact on operational cash flow over the next 3 financial years.