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Beach Energy Limited reports record sales and profits

It is encouraging to see some of the best results ever reported by local oil and gas company released today for the December half in 2013.

Beach Energy (ASX: BPT) is a long established oil and gas exploration, development and production company based in Adelaide. Its corporate goal is “to be recognized nationally and internationally as an innovative and successful explorer, discoverer and developer of oil, gas and related energy resources; to be sought as a partner of choice by industry peers; and to deliver sustainable value to shareholders.”

With total oil and gas reserves of 92.7 million barrels of oil equivalent, production is primarily derived from the Cooper and Eromanga Basins. Exploration and development is involved in conventional oil and gas as well as unconventional shale formations. Beach has held its own alongside Senex Energy (ASX: SXY), Santos (ASX: STO) and Origin Energy (ASX: ORG). All have met with sound exploration and production success in the Cooper Basin and are successfully developing and producing oil and gas.

Beach reported record sales of $557 million in the December half, up 63% on the previous corresponding period (PCP). Volume of 5.6 mmboe was up 23% on the PCP. Profit after tax was $158 million, up 160% on the PCP. It is interesting to note that 53% sales came from oil and 43% from gas and gas liquids, which had a large part to play in the profit increase.

Another interesting point made in the latest half yearly report was that Beach has increased its holding in Cooper Energy (ASX: COE) to 18.4%, just under the legal figure required where a formal takeover offer becomes compulsory. Cooper is another explorer and producer of oil and gas, sharing holdings in the western flank of the Cooper with Beach.

Overseas, Beach holds interests in exploration and production tenements in USA, Egypt, Tanzania, New Zealand and Romania. At Abu Sennan, in Egypt, the latest exploration well flowed at the rate of 4,800 bopd. This is a very promising discovery.

The company’s strategy is focused on maintaining a balanced exposure to risk and reward across existing exploration and development projects.

Foolish takeaway

It could be said that compared with its competitors, Beach is a slow and steady player in growing its business. It has a cash balance of $404 million but pays a relatively small dividend. However, it has relatively large reserves of oil and gas which are increasing at a much faster rate than they are being depleted. This is one to watch and buy for the long term, as it has good underlying assets and a plenty of potential.

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Motley Fool contributor Chris Koenig does not have shares in any of the companies mentioned. 

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