It's been a disastrous 12 months for shareholders in oil and gas producer Beach Energy Ltd (ASX: BPT) with the share price down 46.6%. The longer-term returns are better thankfully, with the stock up 25% over the past five years.
With the oil price at multi-year lows, for investors with an eye to buying stocks which are out-of-favour, the oil and gas sector is one area that could be worth close investigation.
Beach Energy has just completed a whole-of-organisation review which began in April with the group reviewing assets, assessing the organisation and its capabilities and refreshing its longer-term strategy.
Here are the key value drivers which Beach has identified as a result of the review:
- Beach plans to leverage its competitive advantage in the Cooper Basin, through organic and inorganic opportunities, to pursue the significant opportunity set that still remains here across oil and gas.
- Beach plans to establish a major gas business on the east coast basins to extract value from the increasing east coast gas demand profile.
- Beach plans to execute growth opportunities beyond the Cooper Basin to become a multi-basin producer.
Simplified operations:
As part of the review process, management has re-defined the geographic boundaries of the group to focus closer to home where the company has its best chance for ongoing success. This change in strategic direction has led to the exit from Romania, the sale of Egyptian assets and the "farming down" of the Tanzanian permit.
Buy, Hold or Sell:
Like Beach Energy, other major oil and gas players including Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH) are also trading near their yearly lows. These companies own some appealing assets and have significant leverage to a higher oil price which could represent long-term value assuming the oil price eventually settles at higher levels.
