At time of writing, Beach Energy Limited [ASX:BPT] shares are down almost 10%, currently sitting at $1.63 per share.
With half-year results not being released until next Wednesday 13 February, it appears this drop is due to the overnight fall in US crude oil prices.
Oil suffered a 2.5% drop in price last night due to concerns that current global trade tensions would hinder demand growth in the near future.
US–China tension impacting investor sentiment
US President Donald Trump and Chinese President Xi Jinping have been in a tariff truce since their meeting at the G20 summit at the end of November last year.
This 90-day grace period was to be used for the two nations to confront each other’s differences and come to a trade alternative that both sides are happy with.
But with the 1 March deadline approaching, it’s become apparent that Trump and Xi will not meet again in person before the truce period ends.
If no deal is arranged, Trump’s tariff increase will be placed on Chinese goods. And this clearly has markets worried.
Along with oil, other markets also fell with this recent news. The Dow Jones fell 220.77 points. The S&P 500 dropped almost 1%. The NASDAQ decreased by 1.2%.
With global trade looking like it’s slowing, more localised forms of business are thriving as opposed to those who depend on global demand.
What this means for Beach Energy
As with any resource-based company, success ultimately comes down to the value of the resource.
That’s why innovations like Beach Energy’s extension to the Bauer Field development has not been able to protect the company from overnight falls like this one — despite results ‘exceeding expectations from a cost, time, reservoir quality and lateral length perspective’, says CEO Matt Kay.
But what is in Beach Energy’s favour, is the fact that they are involved not only in oil but also gas production and exploration.
As such, with ‘strong customer gas demand and high facility reliability’, Beach has been able to increase FY19 production guidance from 25–27 MMboe to 28–29 MMboe (million barrels of oil equivalent).
Next week’s release of their half-year results may help paint a clearer picture of the future for this stock.
For Markets & Money