Guess which ASX 200 energy share is imploding 18% today on cost blowouts

ASX 200 investors are rushing to hit the sell button on this popular energy stock on Monday.

| More on:
Oil worker using a smartphone in front of an oil rig.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

S&P/ASX 200 Index (ASX: XJO) energy share Beach Energy Ltd (ASX: BPT) is having a day to forget on Monday.

The Beach Energy share price closed on Friday at $1.89. In late morning trade today, shares are swapping hands for $1.55 apiece, down 18.2%.

For some context, the ASX 200 is up 0.1% at this same time.

In a better comparison of apples to apples, of ASX 200 energy shares to ASX 200 energy shares, Santos Ltd (ASX: STO) shares are down 1.3%. Meanwhile, the Woodside Energy Group Ltd (ASX: WDS) share price is down 1.1%.

Here's what's happening.

ASX 200 energy share hammered on rising costs

The Beach Energy share price is getting smashed today after the company reported on a series of quality issues at its Waitsia joint venture project in the Perth Basin.

Beach Energy owns 50% of the JV project; Mitsui E&P Australia owns the other half.

In February, the ASX 200 energy share reported on various quality issues during the pre-commissioning of systems at its Waitsia Gas Plant, including rebuilding compressors and replacing valves and flanges.

Beach Energy said those earlier problems have now largely been rectified.

However, in news that has investors scrambling for the sell button, management today said that "further quality issues are emerging as pre-commissioning activities progress".

Beach and Mitsui are now working to update the production schedule and cost estimates for Waitsia. But the partners said that even before that's completed "the extent of additional quality issues is to a point where current guidance on schedule and cost needs to be updated".

And those, as demonstrated by the sharp share price fall today, have been revised significantly higher.

In the guidance updates for Waitsia Stage 2, Beach Energy now expects first gas from the Waitsia Gas Plant by early 2025. That's been pushed back from the previous expectations of first gas production by mid-2024. The partners plan a three-month ramp-up of production thereafter.

And costs are up significantly. Beach forecasts total capital expenditure of $600 million to $650 million, up from $450 million to $500 million previously.

Additionally, the ASX 200 energy share noted that unavoidable processing costs based on its revised first gas target will also be incurred in FY 2025. Management said they will continue to assess options to partially mitigate unutilised capacity until production kicks off.

The JV partners also are looking to capitalise on potential time swap opportunities with Western Australia gas market participants who have excess gas prior to completion of the Waitsia Gas Plant, in exchange for returning these volumes when they need them most.

What did management say?

Commenting on the cost blowout pummelling the ASX 200 energy share today, Beach CEO Brett Woods said:

It is extremely disappointing to be continually encountering quality and execution issues given the late stage of the project. Having to redirect existing onsite labour to remedial works is slowing the progress of pre-commissioning activities, resulting in further delay and cost increases.

Beach is committed to driving the construction of Waitsia Gas Plant to its conclusion and will work closely with the operator and contractor to deliver this strategically important project.

Motley Fool contributor Bernd Struben 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.

More on Share Fallers

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Clearview, Loyal Lithium, Polynovo, and Weebit Nano shares are falling

These shares are ending the week deep in the red. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why IDP Education, JB Hi-Fi, PYC, and Renascor shares are falling today

These shares are missing out on the good times on Thursday. But why?

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Fletcher Building, Healius, Iperionx, and Iress shares are sinking today

These shares are having a tough time on hump day. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Boss Energy, Meteoric Resources, Pantoro, and Worley shares are falling today

These shares are having a tough session today. But why?

Read more »

Bored man sitting at his desk with his laptop.
Share Fallers

Why ANZ, Fletcher Building, Macquarie, and Sayona Mining shares are dropping today

These ASX shares are starting the week in the red. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Cettire, De Grey Mining, Life360, and Neuren shares are falling today

These ASX shares are ending the week in the red. But why?

Read more »

Scientist looking at a laptop thinking about the share price performance.
Healthcare Shares

Why this high-flying ASX 200 healthcare stock just crashed 11%

Neuren Pharmaceuticals just dropped its 1Q FY24 report on DAYBUE sales.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why Baby Bunting, JB Hi-Fi, Temple & Webster, and Westpac shares are falling today

These ASX shares are having a very tough session. What's going on?

Read more »