Beach Energy Ltd (ASX: BPT) closed yesterday on a healthy gain of 3%. This morning the stock rose another 3.5% and is trading around 70c.

Coming off some very lean years, reported Net Profit after Tax (NPAT) is up 352% to $162million while operating cash flow increased 38% to $321million. Reported production of 10.6 million barrels of oil equivalent [mmboe] represents an increase of 9% over the previous year and reflects a rejuvenated exploration and development program. The company has announced a 1c per share fully franked dividend.

Beach Energy predicts further growth in the current financial year.

Beach participated in 58 wells at a success rate of 79%. The Company's primary oil and gas interests are in the Cooper and Enomanga basins of South Australia and Queensland and the Otway Basin.  

Beach Energy has been reducing costs and consolidated its operations. The company will in all likelihood continue to operate happily at around its current value range into the medium term. Beach says that it is benefiting from improved prices from a new Crude Oil Sale and Purchase Agreements (COSPAs) with the Cooper Basin JV.  

As pointed out by other analysts, Beach's solid cash position has been aided by some well-timed entry to and exit from coal seam gas plays. The company's reported cash reserve of $348million and available liquidity of $689 million will enable continued exploration.

Further out there is strong potential for Beach shareholders to gain from a longer term recovery in global oil and gas prices.

Seasoned oil and gas investors should be aware of:

• the political origins of the current global oil glut (cartels can loosen or tighten the tap or simply lose their grip on it); and
• the insufficiency of recent oil and gas exploration and development to counter longer term production declines and projected increases in global demand.

When the supply of oil eventually surpasses demand a global oil price shock will follow. Such an event may be a few years in the coming however long-term investors may benefit from this upside.

Market speculation that a bad US hurricane season could increase oil prices temporarily and materially benefit companies such as Beach Energy is overstated. The annual hurricane season does however shift focus to the relative fragility of global supply.

Foolish Takeaway

Beach Energy's cash position and pattern of success at the drill mitigate perceived risk and the company is priced accordingly. This stock may be of interest to investors who foresee an end to global oil and gas supply gluts.

The post Why the Beach Energy Ltd share price gained 3% appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX shares to watch as oil price crashes
• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Thursday
• How ASX 200 energy shares like Santos, Beach and Woodside surged in March's sinking market

Spark New Zealand Ltd's (ASX : SPK) share price is currently in the vicinity of $3.62. Last year's earnings per share (EPS) were 22c and are expected by the company to remain stable in coming years.

The resultant price to earnings ratio of around 16.5 is on the high side and reflects a market view that Spark is solid, stable and reliable. 

A bill to add greater certainty to New Zealand's telecommunications industry is currently before the New Zealand Parliament and is likely to be passed.

Within this framework, Spark can create a good future for itself albeit one in which revenues, prices and service standards for core services are overseen by the government. Investors should never expect sky high (super normal) profits within this kind of regulatory space. 

New Zealand is a small and somewhat saturated telecommunications market that is unlikely to experience the rabid levels of competition and infrastructure duplication by large players in the Australian telecommunications sector. This is good news for Spark shareholders.   

Nonetheless there are 80 retailers of broadband products within New Zealand using common fibre and copper cable that is owned by Chorus New Zealand (NZX: CNU). Chorus was required to demerge from Spark in 2011 and is prohibited by regulation from providing direct telco services to customers. Spark does however retain some backhaul fibre and copper assets. Spark's competitors include Vodaphone New Zealand, 2degrees and Vocus. 

Spark is achieving excellent customer retention rates in the migration from copper to optical fibre connections or from copper to a wireless broadband connection. Many New Zealand households now opt to do without a land-line. A reported 77% of Spark customers have reportedly been migrated off copper land-line connections. 

Revenue from Spark's legacy voice and managed data services continues to decline, however, this reduction has been countered by recent growth in IT Services. Spark reports that it has been successful in winning some major government contracts and that the government as a customer remains happy.   

As is the case with many telcos, Spark aims to continue cost reductions by simplifying and digitising both operations and customer interfaces.  

Whether or not Spark deserves a spot in your portfolio may depend partly on your investment exposure to the ebbs and flows of the Australian economy. New Zealand's economy is not without its own risks, however, there is a significant stretch of water between Spark and the so-called Sydney and Melbourne property bubbles. 

Foolish takeaway 

Spark's recent ability to maintain or grow market share, revenue and profitability in its areas of operation is a significant green flag. While Spark maintains this trend the company will continue to be viewed as a safe haven. Perceived safety does come at a price and Spark shares are not cheap. 

Further out there is a risk that Spark will not be able to sustain dividends that exceed company earnings. Spark will need to retain earnings to invest in itself for a longer-term future.  

The post The Spark New Zealand Ltd share price: A long term sparkler or fizzer?    appeared first on The Motley Fool Australia.

More reading

• 3 top ASX dividend shares for retirement income in 2026
• 5 things to watch on the ASX 200 on Thursday
• 26 ASX shares with ex-dividend dates next week

Worleyparsons Limited (ASX: WOR) is one of Australia's premier engineering, project management and advisory services companies.  The company's global focus includes hydrocarbons, mineral, metals, chemicals and infrastructure sectors. 

The market responded positively to recent news that Saudi Aramco awarded WorleyParsons the project management and front-end engineering and design (FEED) services contract for the offshore oil and gas facilities portion and the onshore upstream and downstream pipelines portion of the offshore Marjan Oilfield Development program. This news was not tagged as price sensitive. 

Deutsche Bank analysts have hinted that WorleyParsons revenue may increase, company debt may fall (due to improved management of working capital) and that a dividend may even be reinstated. Broker ratings aside, WorleyParsons has a long way to travel before it can climb back to where it was several years ago.  

WorleyParsons has a diversified business strategy, however, the oil and gas industry remains the rump of the company's operations. Recovery in the volume and profitability of contracts within this sector remains critical to the company's prospects. 

WorleyParsons is winning contracts in all sectors, however, it is difficult to gauge the actual profitability of these activities in the midst of significant staff cutbacks and radical cost-cutting measures while the company is correctly re-scaled to nearer-term revenue expectations.  

The company's May 2017 Investor Presentation flags a range of opportunities including China's New Silk Road economic belt initiative and in Saudi Arabia.   

Investors should be aware that the New Silk Road initiative is in its formative stages only.  China's long term generational visions may present opportunity but there are no guarantees.

Winning favour and ongoing work from companies such as Saudi Aramco (assuming solid ongoing contractual performance) is a more tangible goal. 

Organisational restructures of the scale experienced in recent years at WorleyParsons are never a pure or popular process. Within the scope of the change process, the ability of executive management to now build and retain the staff morale and expertise that is necessary to win and renew contracts will be the key determinant of shareholder well-being. 

The political, economic and conflict related reasons that caused the global crude oil glut are unlikely to go away any time soon. Astute observers will however be aware that several years of underinvestment in the sector will eventually lead to an undersupply crisis.

When the game of catch-up within this sector gains traction, companies such as WorleyParsons will be well placed to realise significant profit margins on the fees they charge. 

Foolish takeaway 

WorleyParsons says that its backlog program of upcoming work is increasing and that staff numbers are stabilising.  The market is starting to price WorleyParsons accordingly. 

WorleyParsons' global revenue footprint may, when stabilised, interest investors seeking less portfolio exposure to Australia's domestic economic conditions and markets.   

Although operating conditions for WorleyParsons may remain reasonably challenging over the next few years the potential for the company to create shareholder value in the longer term remains real in my opinion.   

The post Is Worleyparsons Limited a bargain at this share price?  appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today

Speculation that Telstra Corporation Ltd (ASX: TLS) will cut its dividends from 31 cents per share last financial year to around 25 cents per share this year has seen some dividend focussed investors running for the exit door.

Investors have also been spooked by TPG Telecom Ltd's (ASX: TPM) announced plan to build Australia's fourth mobile phone network.

Adding to the perceived woe, Vodafone Hutchison Australia has appealed to the Federal Court against the ACCC's interim decision not to regulate mobile roaming in regional areas.

Telstra is siding with the ACCC in this case because regulated regional mobile roaming would strip returns from the company's significant investment in the provision of mobile services to regional areas.

The market will have factored future revenue loss associated with an accelerated NBN rollout into the current share price, which is now hovering unhappily around $4.10.

Investors seeking medium to long-term gains should not close their eyes to ongoing judicial processes, market speculation, and share price fluctuations. Short term volatility can, on occasion, flag desirable entry, exit and accumulation opportunities for medium to long term investors.

Strategic investors tend to be focussed on any opportunities to purchase stock such as Telstra at below fundamental value assuming that the company concerned is resilient enough to grow value in the face of likely competition, broader market risk, and technology related risk and opportunity.

Notwithstanding market competition ebbing away at profit margins, Telstra has demonstrated resilience in being able to increase its share of the mobile telecommunications market.

Telstra's business remains competitive and it has potential to grow in many directions including its cyber security, global communications and e-health businesses.

As an infrastructure rich wireless provider, Telstra is well positioned to compete directly with NBN.

Put simply, mobile phone towers can be linked with cable to provide high speed, data rich internet access without necessarily going anywhere near the NBN.

While competing against NBN at one level, Telstra is also likely to remain a key NBN reseller due to its capacity to package a wide range of services into its plans for households, businesses and corporations.

Telstra and its competitors are currently in a frantic rush to cut costs by terminating staff and consolidating business processes while pretending to deliver a consistently high level of customer service.

There may be several reasons behind this trend that go beyond simple market competition. Investors should never forget that the telecommunications business within Australia is controlled by Federal Government puppeteers that seek to win votes and generate revenue for government.

Companies may seek to mask any excessive profits within such environments. Ability to play the referee can be as important as being able to play the opposition in any highly regulated game and Telstra retains stealthy political clout.

Foolish takeaway

The fundamentals of Telstra's business continue to be pretty solid. Many retiree holders will undoubtedly be unhappy with any decision to reduce dividends. However, the harsh reality is that Telstra needs cash to invest in itself to prosper. Borrowing money to pay unsustainable dividends is not a sensible way forward for any business.

The challenge for Telstra's CEO Andy Penn is to sell his company's underlying strength and abilities to the market.

The post Why Telstra Corporation Ltd could be about to slash its dividends appeared first on The Motley Fool Australia.

More reading

• Why ASX dividend investing still works for building long-term wealth
• How to build a $10,000 annual income with ASX shares
• 3 top ASX dividend shares for income investors to buy
• How to invest $300 a month in Australian shares to target a $50,000 annual second income
• 2 ASX dividend stocks that could pay you a passive income for years

On 7 June 2017, Vocus Group Ltd (ASX: VOC) received a non-binding takeover bid from Kohlberg Kravis Roberts & Co (KKR) of $3.50 per share.

Prior to the receipt of this bid, Vocus shares had plunged from a trading high above $9 in August 2016 to a low of $2.33 in May 2017.

The share price is currently trading in the vicinity of $3.55. Longer term holders will be deeply disappointed that the trashed share price seems to be largely supported by an arguably low-ball offer from KKR. The market clearly has difficulty in placing a value on Vocus's diverse Australian and New Zealand-based operations.

Vocus holds extensive fibre optic cable assets and provides cloud and telco services for both wholesale and retail customers.

Vocus's mass market Australian brands include Dodo, iPrimus and Commander. New Zealand operations drive around 17% of revenue and include the CallPlus Group which markets the Orcon and Slingshot brands. The New Zealand portfolio includes energy company Switch Utilities Limited.

As we move towards so called 5G and 6G technologies, appetite for data, speed and bandwidth will increase many fold. Vocus boasts that it now has over 21,000 km of fibre-optic cable laid and operational throughout Australia, 5,000 on-net buildings connected to its network, and a further 20,000 buildings classed as near-net.

A recent agreement between Vocus and Alcatel Submarine Networks (ASN) to construct 4,600km of submarine cable linking Australia, Indonesia and Singapore may be blipping on the radar screens of some deep pocketed entities that have capacity to either invest in Vocus or swallow it whole.

The intuitive value of undersea global fibre optic assets is high. The challenge and high cost of laying competing fibre-optic cables may keep competitors at bay until demand for data and bandwidth thoroughly outstrips the capacity of existing cables.

On the Australian domestic front, the prices that Vocus may levy for the provision of high-speed internet services on its non-NBN fixed line network are regulated by the Australian Competition and Consumer Commission (ACCC).

Prices are also capped by the willingness of consumers to pay for premium fixed line services. While price lids for high speed fixed line services may not be ungenerous, internal company discipline to control network roll-out cost and administrative overheads are required for survival in a competitive telecommunications market.

Vocus's most recent investor briefing highlights cost control as a key risk. The transformation strategy that is proposed to control company costs involves consolidating, strengthening and standardising internal processes and systems. While the proposed strategy may be sound it will inevitably require time, money, expertise and ongoing chief executive commitment to implement.

To help the market get a handle on what the company may be worth, future investor briefings may do well to place additional focus on the practical benefits management sees in the company structure that they are creating.

Notwithstanding bearish market sentiment that is reflected in the recent share price collapse, guidance for FY 17 includes revenue in the order of $1.8 billion, earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the range of $364-$375 million and net profit in the range of $160-$165 million. An annual dividend of 6 cents per share was paid on 21 April 2017.

Foolish Takeaway

Merger and acquisition activity in the sector will likely continue and may present opportunities for medium-term investors who are willing to take a punt on companies such as Vocus.

The outcome of the current takeover attempts surrounding Vocus cannot be predicted, however, formal interest by companies such as KKR suggests significant fundamental value at current share price levels.

The post Is Vocus Group Ltd cheap at a $3.50 share price? appeared first on The Motley Fool Australia.

More reading

• Why these ASX ETFs could be top picks for investors in their 50s
• Buy, hold, sell: Life360, Northern Star, and Sigma shares
• 2 ASX gold stocks to buy next week
• $100k vs $600k in superannuation: How different would retirement be?
• A rare buying opportunity to buy 1 of Australia's top shares?