Beach, Origin Shares Slide Despite Strong Results

Solid quarterly updates from the two remaining energy groups yesterday for the three months to March in the shape of the Kerry Stokes-dominated Beach Energy and LNG exporter and power operator, Origin.

Revenue for Origin Energy’s Australia Pacific LNG gas business leapt more than 50% year on year in the three months to March.

Origin’s joint venture Australia Pacific LNG (APLNG) delivered its highest ever quarterly revenue of $764 million, up 53% compared to the same time last year.

This was despite actual gas sales from APLNG only rising by 1%. A total of 33 LNG cargoes were loaded and shipped from Australia Pacific LNG in the quarter.

Origin said its electricity sales volumes were up 7% on the previous quarter driven by higher retail demand over summer, which was partially offset by lower business volumes.

Natural gas sales fell 10%t on the prior quarter, reflecting seasonal demand and the ending of short-term wholesale contracts in Queensland.

This decline in sales was partly offset by more gas utilised in generation, Origin said in yesterday’s statement.

“Australia Pacific LNG continues to deliver strong earnings with record revenue during the quarter,” Origin chief executive Frank Calabria said in a statement to the ASX.

“This result was driven by continued reliable operational performance and higher realised commodity prices.”

“Australia Pacific LNG continues to deliver strong earnings with record revenue during the quarter. This result was driven by continued reliable operational performance and higher realised commodity prices, “ he said in the statement.

“In the Energy Markets business, our power stations performed solidly over the summer and were ready and available during heatwave conditions which occurred across much of the country in January and again in March.

“While gas sales to wholesale customers declined in the quarter, we directed additional gas to generation where it helped to meet peak summer demand in the electricity market.

Origin shares fell 1% to $7.37.

Meanwhile, record oil production in the Western Flank of the Cooper Basin helped underpin a strong March quarter result for Beach which saw sales revenue increased to $470 million for the three months.

That was on a solid production performance which saw total quarterly production of 7.23 million barrels of oil equivalent (MMboe) up 10% on the prior corresponding period ( but down3% on the prior quarter) due to strong customer gas demand and increased oil production.

Beach said yesterday that 2018-19 production is expected to be towards the upper end of guidance range of 28 – 29 MMboe, “driven by higher oil output, improved facility reliability and continued strong customer demand for gas.”

2018-19 underlying EBITDA is also expected to be towards the upper end of the guidance range of $1.25 – 1.35 billion, also driven by the strong production outlook and higher liquids prices, while 2018-19 capital expenditure is expected towards the lower end of guidance range of $450 – 500 million.

That confidence helped the company’s major shareholder, the Kerry Stokes controlled Seven Group Holdings upgrade its 2018-19 guidance late on Monday (see separate story).

Beach CEO Matt Kay said “The focus on oil was again evident, with oil output up 10% quarter-over-quarter to 1.8 MMbbl,” Mr. Kay said.

“This was driven by exceptional results in the Western Flank, where Beach recorded its highest quarterly oil production.

“The recent Bauer appraisal and development campaign has now seen more wells come online, with production performance of the Hanson-7 well a highlight, averaging over 1,600 bopd free flow in its first 30 days. The Bauer Field produced its 20 millionth barrel of oil during the quarter.”

Mr. Kay said the combination of strong customer nominations and continued improvement in plant reliability, ensured Beach’s gas business continued to flourish. Overall gas production of 26 PJ was 10% higher than the prior corresponding period.

“Beach remains focussed on delivering increased gas volumes into the east coast market. The Ensign 931 rig is on site for drilling of the Haselgrove-4 appraisal well in South Australia, the first well in our Otway drilling campaign. After the two South Australian Otway wells, drilling operations will move to the Victorian Otway where ten drilling opportunities are planned in the next four years.”

Beach reported $130 million of free cash flow for the third quarter. This takes the current year to date figure to $427 million. With one quarter remaining, Beach is ahead of the $290 million estimated for FY19 at the Beach Investor Day in September 2018.

Net debt was reduced by $112 million to $219 million at the end of March. The company says it is on track to be debt free upon completion of the Otway Sale which is currently expected during the current June quarter of 2018-19.

Beach shares were down 2.3% at $2.13.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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