Shares in Beach Energy Ltd [ASX:BPT] were up 7% today. BPT was trading at $1.35 at time of writing, after opening at $1.28.
The oil and gas explorer has performed strongly since mid-2017, with shares more than doubling from a low of $0.54 in June. Beach will offer an interim dividend of 1 cent per share.
What happened to the Beach Energy share price?
The share price rose following the company’s release of its first-half results for the 2018 financial year. Beach Energy’s underlying net profit for the year is up 5% to $93 million, offset by the recent $1.585 billion acquisition of Lattice Energy.
Sales jumped 12% to $386 million, spurred on by higher oil and gas prices. The realised price of oil rose 30%, while gas was up 9%.
The purchase of Lattice from Origin Energy more than doubles Beach Energy’s production capability and reserves…and expands its area of operations beyond the Cooper Basin in northern South Australia.
What’s more, Lattice’s reserves will include the Otway Basin and Bass Basin in Victoria, the Perth Basin in Western Australia, and the Taranaki Basin in New Zealand.
The firm has also signed new gas sales agreements with Adelaide Brighton Cement Ltd and Alinta Energy in December last year.
Formerly Beach Petroleum, the Adelaide-based company was formed in 1961, and listed on the ASX in 1962.
Beach Energy is currently Australia’s biggest onshore oil producer, with projected full-year production of 25.5–27.6 million barrels of oil equivalent (BOE). This includes 10.6–11 million BOE from Beach Energy’s existing Cooper Basin resources, and 14.9–16.6 million BOE from the Lattice network.
What to expect from Beach Energy in the future
With rising gas prices seemingly locked in for the coming years, Beach looks well positioned to benefit from the potential synergy that was created from incorporating Lattice into Beach Energy’s operations.
Accordingly, Beach Energy is targeting synergies of $50 million per annum through the Lattice deal, partly through reduced operating costs of $15 million.
Beach is also set to acquire Toyota Tsusho’s 5% stake in the Otway Gas Project and 11.25% stake in the BassGas Project.
This will provide Beach Energy with a 100% interest in the Otway Gas Project, a 53.75% interest in BassGas producing assets, and a 50.25% in BassGas exploration permits.
With today’s result, Beach Energy looks set to continue its strong performance over the past six months. If you’re looking for other stocks with potential in the mining sector, take a look at Jason Stevenson’s free report: ‘The Top 10 Mining Stocks in Australia for 2018’.
For Markets & Money