Beach Energy Group Ltd (ASX: BPT) shares are among the best performers on the S&P/ASX 200 Index (ASX: XJO) on Monday after the company delivered much better than expected revenue in the first quarter.
The Adelaide-based oil and gas producer generated sales revenue of $537 million during the first quarter, up 18% on the previous quarter and 25.8% compared with the same quarter last year.
The company's shares were trading 4.4% higher at $1.13 on the announcement on Monday, but while the stock is having a good day, it remains not far off the 12-month low of $1.09 per share.
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Strong start
Beach Managing Director Brett Woods said it was a strong start to the year, with increased production overall and two liquefied natural gas cargoes lifted from the company's Waitsia gas development in Western Australia.
Higher demand for our gas over the winter period combined with initial reinstatement of some flood-affected wells in the Cooper Basin saw production increase 8% quarter-on-quarter to 5 million barrels of oil equivalent. An additional LNG cargo this quarter helped revenue increase 18% to $537 million, supporting our strong financial position. At quarter-end, Beach had over $500 million of available liquidity after returning a record $137 million to shareholders in dividends.
Mr Woods said that during the quarter, two offshore wells were drilled in the Otway Basin off Victoria, with the Hercules well – a moderate to high-risk target – failing to find any hydrocarbons.
The second phase of drilling at that project is expected to start in the second half of the financial year, he said.
Analysts like what they see
Analysts at RBC Capital Markets said they expected that the Hercules project would cost Beach about $50 million.
They went on to say:
Overall, materially higher than expected sales revenue has helped offset the poor news on Hercules and potential for slightly higher costs at Waitsia.
The RBC team have a sector perform rating on Beach and a price target of $1.20.
Beach said it participated in the drilling of 26 wells in the Cooper Basin during the quarter, including two that were still ongoing at the end of the quarter.
An overall success rate of 96% was achieved from one oil exploration well, two oil development wells, one gas exploration well, one gas appraisal well and 19 gas development wells.
The company said it was in the final stage of commissioning at the Waitsia Stage 2 project.
As the company said:
Final preparations for introduction of gas from the Waitsia field are currently underway. Introduction of gas will mark achievement of the Ready For Start Up (RFSU) milestone in readiness for transition to production operations. First sales gas from the Waitsia Gas Plant is expected within two weeks after the RFSU milestone. Once online, production rates from the Waitsia Gas Plant are expected to ramp up towards nameplate capacity.
