At time of writing, Beach Energy Limited [ASX:BPT] shares are trading at $2.17, which marks a mind-blowing price increase of 9.04%.
The Adelaide-based oil and gas company secured this impressive climb in the wake of their announcement of an aggressive five-year company growth plan as part of their 2018 Investor Briefing presentation.
The details were released on the ASX early this morning.
High estimates for Beach Energy share price by 2023
According to the report, Beach Energy’s aim is to grow production to 30–40 million barrels of oil equivalent (MMboe) by FY2023. This year’s results showed 19.0 MMboe, with an FY2019 forecast of 26-28 MMboe.
Needless to say, Beach are very optimistic about their future. And for good reason.
This year saw major positive changes in Beach Energy, the most significant being the acquisition of Lattice Energy, which has resulted in record profits and production numbers.
CEO Matt Kay announced today:
‘Now, as we look ahead at the next 5 years, we see a very exciting period of growth for the company. With the new portfolio targeting the Cooper Basin, we are targeting delivery of more than $2.3 billion free cash flow...’
They also plan on being a debt-free company by the end of FY2020. This, Kay says, is a ‘…remarkable achievement considering our net gearing stood at 33% at the end of January this year’.
Beach Energy expect 100% of their currently undeveloped 2P reserves to have commenced development over the next five years.
Their five-year outlook also sees a 3% increase in operated facility reliability which, as it will help achieve production targets, ‘could increase annual revenues by more than $20 million’.
Of course, we tend to go by the saying ‘the proof is in the pudding’, meaning we need to see it to believe it. But in this case, Beach Energy has already proven that their pudding is quite lucratively delicious.
its been an Impressive movement in this financial year for the company.
The report reiterated Beach Energy’s Compound Annual Growth Rate (CAGR) of 141% from FY2016 to FY2018.
In addition, their underlying EBITDA projected to reach above $1 billion since it has more than doubled in value from its FY2016 result of less than $250 million.
The Cooper Basin is a main driver of Beach Energy towards this future growth. Recent improvements to this scheme have seen a 50% reduction in drilling costs and a 40% reduction in drill cycle times.
This means that more wells can be drilled per annum using the same number of rigs…cost effectivity at its finest. As a result, they anticipate this site to contribute up to 30% of the next five years of free cash flow to Beach.
What next for Beach Energy?
The company certainly seems to have put itself in a good position to achieve further growth in the year ahead.
Beach Energy is exposed to four key commodity markets, including global liquids, which was responsible for 67% of their FY2018 revenue. And with further investment going in cost-reduction measures, this figure has all the opportunity to increase.
As stated in the report: ‘We have delivered on promises since 2016 and intend to continue’.
Perhaps it’s this confidence alone that is sparking the interest of investors, though the numbers aren’t disappointing.
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