Beach Energy share price surges 3.5% on JV announcement

The Beach Energy Ltd (ASX: BPT) share price has surged more than 3% on the ASX today following a key strategic announcement between the company, Santos Ltd (ASX: STO) and Key Petroleum Ltd (ASX: KEY) yesterday morning.

What was the announcement?

Key Petroleum announced a non-binding Memorandum of Understanding (MOU) had been executed between Key, Santos and Beach Energy (and subsidiaries) to cover proposed terms for connection and transport into the Cooper Basin gas gathering network and gas processing at the Santos-operated Moomba Gas Processing Facility.

Santos and Beach Energy are joint venture (JV) partners which own gas processing facilities at Moomba in South Australia, where Santos acts as the Operator of the plant. The latest announcement (on confidential terms) will form the basis of a future binding agreement for supply to the east coast Australian gas market.

The current gross un-risked potential resources at Key’s Tanbar Gas Project in ATP 924 is estimated to be between 150 billion cubic feet (Bcf) to 950 Bcf.

Beach continues to benefit from high gas prices in the Australian market, which have been sustained above $9-$10 per gigajoule (GJ) and likely to remain high amid an ongoing gas shortage around the country.

So what’s the verdict on the Beach share price?

The Beach share price has been on the tear in 2019, as it has rocketed more than 60% higher to sit amongst the top stocks in the S&P/ASX200 Index (ASX: XJO). With the index returning 11.5% so far this year, investors in Beach have risen a strong earnings report in February and key strategic announcements to a near-record high.

At the time of writing, Beach’s stock was trading at $2.08 per share, just shy of the $2.11 mark set on October 2018 after it sold its 40% interest in Victorian Otway assets.

I think the technical environment remains supportive for Australian gas and Beach is one of the better picks within the sector in my view. The gas industry remains at the mercy of government energy policy (or lack thereof) and will surely see some volatility in the months before and after the May Federal Election.

For those who aren’t willing to jump into the energy sector just yet, I’d be checking out these top growth shares that have been tipped as market beaters.

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Motley Fool contributor Lachlan Hall 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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