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Why the Beach Energy Ltd share price is surging today

Shares in oil and gas exploration and production company Beach Energy Ltd (ASX: BPT) were among the top 10 gainers on the S&P/ASX 200 today as the company released a strong half-year report.

Beach holds interests in exploration and production tenements in Australia, Tanzania, New Zealand and Romania. Currently, the flagship operations are located in the Cooper/Eromanga Basins and New Zealand.

Beach Energy booked a 14% increase in revenue to $392.6 million thanks in part to higher oil and gas prices for the half-year ending December 31, 2017, an EBITDA up 5% to $236 million and underlying NPAT up 5% to $93 million.

Beach Energy’s report detailed an “active and successful” first half for FY18, with continued progress in the Cooper Basin and the financial close of the $1.58 billion Lattice acquisition as notable events.

The Lattice buy should pay off, with Beach saying the acquisition would see “diverse and multiple” growth opportunities including; improved cash flow to maintain financial strength, the opportunity to expand beyond the Cooper Basin, grow their east coast gas business and optimise current Cooper Basin projects.

Lattice bring with it a 50% stake in the onshore gas discovery project Waitisa Gas – forecast to inject $50 million per annum into the Beach books.

Shareholders rallied behind the Adelaide-based company on February 19 with the share price zooming up 5.3% to $1.33 at the time of writing, no doubt buoyed by the announcement of a 1c per share fully-franked interim dividend payable on March 30.

Operationally Beach has upgraded its full-year outlook due to drilling and field development successes and a potential large gas discovery at Haselgrove-3 ST1 in the Otway Basin.

Beach announced free cash flow levels have hit $155 million, a 12% increase in sales revenues and ‍FY18 pro forma capital expenditure expected to be within the range of $405 million to $455 million.

The Beach Energy share price has travelled upwards consistently since this time last year, when it was at just 69c per share.

Analysts should weigh in on the results in coming weeks with expectations likely to hinge on how potential earnings from Lattice could increase Beach’s position in the market.

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