Why is the Beach Energy share price tumbling 7% on Monday?

Natural gas prices are down today. But there might be more than that driving Beach Energy shares lower?

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Key points

  • Beach Energy shares are sinking 6.95% to $1.57
  • The company identified a a drillable fault block over the Yolla field which could lead to a nearer-term, attractive investment opportunity
  • The move to pursue drilling at Yolla West will push back the date for completing the final investment decision on Trefoil

The Beach Energy Ltd (ASX: BPT) share price is in reverse today following the company’s Bass Basin update.

At midday on Monday, the energy producer’s shares are down 6.95% to $1.57.

For context, the S&P/ASX 200 Index (ASX: XJO) is also in negative territory by 0.8% to 6,422.8 points.

Beach Energy identifies new Yolla West infield opportunity

Investors are offloading Beach Energy shares this morning after the company announced some changes.

According to its release, Beach Energy has identified a drillable fault block over the Yolla field.

This came to light following a move to reprocess the existing 3D seismic data.

As such, management has decided to prioritise the development of Yolla West, which represents a lower-cost and higher-returning investment opportunity.

If the drilling yields successful results, Yolla West could be connected to the Lang Lang Gas Plant.

Consequently, the company has had to defer the final investment decision for Trefoil past the original timing of H1 FY23.

Evidently, this allows Beach Energy more time to complete the interpretation of the Prion 3D seismic survey. The company expects this to occur around mid-FY23.

In addition, management can further refine the most cost-effective development option and benchmark the Trefoil investment case against other opportunities.

At the moment, Beach Energy is in discussions about securing a rig at Yolla West.

A drilling campaign is being targeted to commence over the 2022/23 summer.

However, this is subject to receiving regulatory and joint venture approvals.

Beach Energy CEO Morné Engelbrecht touched on the Bass Basin acreage, saying:

The decision to prioritise Yolla West and defer Trefoil is consistent with our focus on pursuing value maximising investments.

As elevated demand in the east coast gas market exacerbates spot gas prices, Yolla West presents as an opportunity to get new gas supply to market in a timely manner. Market engagement for these potential new volumes will commence shortly.

It’s worth noting that natural gas prices are currently down 3.38% to US$6.71/MMbtu (British thermal unit) today. This could also be impacting Beach Energy shares.

Beach Energy share price snapshot

Despite today’s losses, the Beach Energy share price has surged more than 20% over the last 12 months.

These gains have mostly come from gains achieved year to date, up 24.8%.

Beach Energy shares touched a 52-week high of $1.905 on 9 June before sinking 15% in a week.

Based on today’s price, Beach Energy presides a market capitalisation of roughly $3.86 billion.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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