Beach Energy share price storms 7% higher after lifting its guidance

The Beach Energy Ltd (ASX:BPT) share price has stormed higher this morning after the energy company increased its guidance following a string second quarter…

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In morning trade the Beach Energy Ltd (ASX: BPT) share price has stormed higher following the release of its second quarter update.

At the time of writing the Beach share price is up almost 7% to $1.82.

What happened in the second quarter?

During the December quarter the company produced 7.4 million barrels of oil equivalent (MMboe), which was down 4% on the previous quarter.

Although this was a decline on the previous quarter, it was a solid result given the impact of seasonally lower gas demand.

Sales volume of 7.7 MMboe was 7% below the September quarter, due largely to lower seasonal gas sales. This of course impacted its sales revenue during the quarter, but not as much as you might have expected given the 17% reduction in realised oil prices.

Quarterly sales revenue came in at $441 million, down just 14% from the September quarter.

What's next?

In light of its stronger than expected production during the first half, higher than expected customer gas nominations, and improvements in its facility reliability, management has increased its full year guidance.

It now expects FY 2019 production in the range of 28 to 29 MMboe, compared to previous guidance of between 25 and 27 MMboe.

Management has also narrowed its capital expenditure guidance from between $440 million and $520 million to between $450 million and $500 million.

Should you invest?

While I prefer to gain exposure to the oil and gas industry through a diversified miner like BHP Group Ltd (ASX: BHP), I do see a lot to like in Beach Energy.

Especially given how it is well placed to potentially capture a good share of east coast gas trading. It also has opportunities to accelerate its growth through acquisitions and a very promising asset in Western Australia – Waitsia.

This could make it one of the better options in the industry along with Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) if oil prices stabilise.

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.

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