Beach Energy Ltd (ASX: BPT) shares are under pressure on Tuesday morning.
At the time of writing, the ASX 200 energy stock is down 4.5% to $1.14.
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What is weighing on Beach Energy shares?
This weakness is being driven by the release of the company's third-quarter update, which included softer sales, a guidance downgrade, and ongoing operational disruptions.
According to the release, Beach Energy reported production of 4.8 MMboe for the quarter, which was up 7% on the prior quarter.
However, this was overshadowed by a decline in sales volumes, which fell 10% quarter on quarter to 5.3 MMboe, and a 6% drop in revenue to $419 million.
Guidance downgrade disappoints
But the main thing weighing on Beach Energy shares has been a downgrade to its full year production guidance.
Beach Energy now expects FY 2026 production to be in the range of 19.4 MMboe to 20.3 MMboe. This is down from its previous guidance range of 19.7 MMboe to 22.0 MMboe.
Management attributed the revision to a combination of factors, including weather-related disruptions, ramp-up challenges at the Waitsia Gas Plant, and cyclone-related shutdowns.
These issues appear to have raised concerns about the company's ability to deliver consistent production growth in the near term.
Mixed operational performance
While production increased overall, the performance across Beach Energy's asset base was mixed.
The Perth Basin delivered strong growth, with production rising 174% due to the ramp-up of the Waitsia Gas Plant.
However, this was offset by declines elsewhere. Production in the Otway Basin fell 9% due to lower customer demand, while the Cooper Basin and Western Flank operations were impacted by severe rainfall, leading to lower output.
In addition, LNG volumes were significantly lower due to one less cargo during the quarter, which also weighed on sales and revenue.
On the pricing front, Beach Energy benefited from a 19% increase in realised oil prices to A$125 per barrel.
However, realised gas prices declined 6% to $11.2 per gigajoule, reflecting softer demand and lower spot pricing on the East Coast.
Management commentary
Commenting on the quarter, Beach Energy's managing director and CEO, Brett Woods, said:
This was a pivotal quarter for Beach, with the Waitsia Gas Plant reaching 94% of nameplate capacity, the Equinox rig returning to commence Phase 2 of the Otway offshore campaign and a final investment decision was taken on the Moomba Central Optimisation (MCO) project. Combined with strong cash generation and three new tenement awards, the third quarter marks the continued progress on our strategy.
Strong free cash flow generation, supported by one Waitsia LNG cargo and strong oil pricing, saw Beach's financial position continue to strengthen. Revenue of $419 million contributed to an increase in available liquidity to $974 million and a reduction in net gearing to 11%, providing optionality for future growth.
