One of the best performers on the local market on Thursday has been the Beach Energy Ltd (ASX: BPT) share price. In afternoon trade the energy producer’s shares are up a sizeable 9.5% to $2.18. Why are Beach Energy’s shares on fire? Hot on the heels of the Santos Ltd (ASX: STO) investor day on Wednesday, Beach Energy is hosting its own investor day today. Ahead of the event the energy producer released a presentation to the market which revealed its growth plans through to FY 2023. According to the release, the company plans to grow production to 34…
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One of the best performers on the local market on Thursday has been the Beach Energy Ltd (ASX: BPT) share price.
In afternoon trade the energy producer’s shares are up a sizeable 9.5% to $2.18.
Why are Beach Energy’s shares on fire?
Ahead of the event the energy producer released a presentation to the market which revealed its growth plans through to FY 2023.
According to the release, the company plans to grow production to 34 to 40 million barrels of oil equivalent in FY 2023. As a comparison, in FY 2018 Beach Energy achieved total production of 19 million barrels of oil equivalent, which was up 80% on the prior corresponding period.
Management advised that this production growth, which is dependent upon reservoir performance and drilling outcomes, will be underpinned by a strong cash position, with the company targeting delivery of more than $2.3 billion free cash flow over five years.
Chief executive officer, Matt Kay, made it clear to investors that he wants Beach Energy to be known as a company that delivers on its promises.
He stated that: “We have delivered on our promises to perform as a low cost operator, to deliver the highest standards of safety and sustainability, and to drive increased value for our shareholders.”
Before adding that: “Now, as we look ahead at the next 5 years, we see a very exciting period of growth for the company. With the new portfolio combined with the Cooper Basin, we are targeting delivery of more than $2.3 billion free cash flow over five years.”
Should you invest?
While I wouldn’t be a seller of its shares if I owned them, I wouldn’t be a buyer unless they pulled back meaningfully to a more attractive level. At the current level I feel they are priced to perfection and don’t offer a compelling enough risk/reward.
In light of this, I continue to believe that diversified miners such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) would be better options for investors looking to gain exposure to the resources sector.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.