Beach Energy Limited · ASX:BPT
Beach Energy — FY2020 Earnings Presentation
54 slides from Beach Energy's earnings presentation, Aug 17, 2020
Slide 1: FY20 Full Year Results and Outlook Presentation
17 AUGUST 2020 FY20 FULL YEAR RESULTS AND OUTLOOK PRESENTATION
Slide 2: Compliance statements
Compliance statements Disclaimer Assumptions This presentation contains forward looking statements that are subject to risk factors associated with oil, gas and The five year outlook set out in this presentation is not guidance. The outlook is uncertain and subject to change. The related businesses.
Slide 3: Our purpose
Our purpose “Sustainably deliver energy for communities” 3
Slide 4: COVID-19 impact
COVID-19 impact FY20 was a tale of two halves At FY20 half year results COVID-19 impact on COVID-19 risks mitigated via HSER Balance sheet strength at 30 June 2020 On track to deliver growth program prior to ▪ Rapid response to protect staff, contractors, assets ▪ $50 million net cash and $500 milli
Slide 5: Beach Response to COVID-19
Beach Response to COVID-19 The Journey Office Staff Emergency Crisis Management Business Continuity COVID-19 Site Partial Return to Transitioned to Response Exercises Team Team Specific Procedures Office Work from Home and Assurance Activated Activated Commenced Activated Commenced Focus moving 20 F
Slide 6: Summary
Summary A high margin and high growth business Solid FY20 result in Entering FY21 with a strong Actively controlled investment challenging conditions foundation program ✓ Responded quickly to COVID-19 threat ✓ Balance sheet in net cash position ✓ Planned FY21 capital expenditure reduced by >30% ✓ 17
Slide 7: Looking back over FY19/20
Looking back over FY19/20 Track record of delivery on journey to date Total Total Met (✓ ) or FY19 + FY20 guidance1 FY19 + 20 results Exceeded (✓ ✓) Production (MMboe) 53–57 56.1 ✓ Capex ($ million) 1,210–1,390 1,310 ✓ Free Cash Flow ($ million) 310 437 ✓✓ 2P reserves replacement ratio >100% 209% ✓✓
Slide 8: Reserves and contingent resources
Reserves and contingent resources Organic 2P reserves replacement above 200% for three straight years Summary of reserves at 30 June 2020 Highlights (developed plus undeveloped, net to Beach) ✓ 2P reserves increased by 8% from 326 MMboe to 352 MMboe (MMboe ) FY19 FY20 ✓ 214% organic 2P reserves repl
Slide 9: Beach Energy HSE performance
Beach Energy HSE performance Strong performance despite COVID-19 challenges Safety performance Environmental performance2 15.6 60 16 Crude/Hydrocarbon Spill Volume (kl) 50 51.9 12 9.7 40 7.9 TRIFR 8 30 5.9 5.7 3.8 4.1 3.7 20 3.5 3.5 3.4 4 10 9.6 0.2 0.1 0.1 1.7 0 0 FY15 FY16 FY17 FY18 FY19 FY20 FY15
Slide 10: Sustainability
Sustainability Beach releases new emissions targets ▪ Beach remains committed to a lower carbon future ▪ Emissions benchmarking undertaken at all sites ▪ Board approved emissions reduction target of 25% CO2e by FY25 relative to FY18 benchmark levels1 ▪ Portfolio tested against carbon price of up to
Slide 11: Financial Results
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N Financial Results
Slide 12: FY20 financial summary
FY20 financial summary A net cash, high margin, high returning business FY20 results Balance sheet and asset quality ✓ FY20 underlying NPAT $461 million ✓ $50 million net cash ✓ Underlying EBITDA margin 67% ✓ $500 million liquidity ✓ ROCE 19% ✓ No producing asset impairments at lower long term oil p
Slide 13: Financial highlights
Financial highlights $ million (unless otherwise indicated) FY19 FY20 Change Underlying EBITDA ( 19%) ▪ FY19 Otway sale impacted production and sales volumes, Production (MMboe) 29.4 26.7 9% with production 2% higher on pro forma basis Pro Forma Production1 (MMboe) 26.2 26.7 2% ▪ 21% decrease in re
Slide 14: Financial strength maintained
Financial strength maintained Strong operating cash flow supports record investment program ▪ FY20 operating cash flow, excluding tax paid, Movement in cash of $1,139 million 1,600 $ millions ▪ FY20 cash tax of $265 million 1,400 60 24 1,139 ▪ Record cash capital expenditure of $920 1,200 million as
Slide 15: Movement in Underlying NPAT
Movement in Underlying NPAT $ millions 1,000 $461 million Underlying NPAT is 18% lower 900 than FY19 driven by factors including: 22 31 800 33 11 ▪ 24% reduction in realised USD liquids prices 34 Other2 Cash Net 34 64 production Other Tax financing 700 Gas and costs costs revenue3 43 ▪ Sale of 40% i
Slide 16: Balance sheet and capital management
Balance sheet and capital management Rock solid balance sheet and gas revenues support growth Balance sheet strength Capital management framework ▪ $50 million net cash, $500 million liquidity at 30 June 2020 Beach’s capital management priorities remain unchanged: ▪ Fixed price gas contracts provide
Slide 17: Our markets
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N Our markets
Slide 18: Beach Energy portfolio diversity
Beach Energy portfolio diversity Six production hubs supplying 3 distinct gas markets West Coast 2% gas 33% Liquids Oil FY20 45% production Gas 26.7 MMboe 55% 46% East Coast 6% gas Condensate 6% 7% LPG NZ gas 18 Portfolio diversity (location, product, gas market) provides natural hedge
Slide 19: East coast gas market
East coast gas market Market dynamics support Beach’s investment strategy Conventional supply Eastern Australia gas demand vs supply (PJ)1 2,000 CSG supply 1,500 LNG exports from 1,000 QCLNG, APLNG and GLNG 500 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 20
Slide 20: Beach portfolio not exposed to east coast spot gas prices
Beach portfolio not exposed to east coast spot gas prices Forecast FY21/22 East Coast Gas Sales Recent gas market dynamics Spot Market ▪ Low LNG spot prices have resulted in increased diversion of LNG gas supplies Pricing into the East Coast gas market, impacting spot prices (% of volume) 2% ▪ Beach
Slide 21: Asset update
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N Asset update
Slide 22: Perth Basin
Perth Basin Final Investment Decision planned for Waitsia Stage 2 in December quarter FY20 outcomes Strategic considerations ▪ Aligned Perth Basin interests with Mitsui (MEPAU) ▪ Large, high quality, low cost gas resource close to existing major gas pipelines ▪ FID of Waitsia Stage 1 expansion (to 2
Slide 23: Waitsia Stage 2 expansion via North West Shelf (NWS)
Waitsia Stage 2 expansion via North West Shelf (NWS) Two years of progress and ready to reach Final Investment Decision ✓ Non-binding gas processing term sheet signed with NWS ✓ Fully termed agreements being worked through North West Shelf access ✓ Plan to sell equity LNG from start-up in late calen
Slide 24: Victorian Otway Basin
Victorian Otway Basin Offshore drilling campaign to commence in FY21 FY20 progress and current status Strategic considerations ▪ Executed new rig contract at competitive day rate ▪ Key gas infrastructure supplying domestic with Diamond Offshore customers in the East Coast gas market ▪ 6 firm and 3 o
Slide 25: Victorian Otway Basin
Victorian Otway Basin Mitigating COVID-19 related supply chain and execution risks Examples of COVID-19 supply chain interruptions and mitigation actions Supply chain location for Offshore Victorian Otway Basin Item Location COVID-19 Challenges Mitigation drilling and development campaign Batam, Ski
Slide 26: Western Flank Oil
Western Flank Oil 159% 2P reserves replacement Wells generating IRRs >100% FY20 progress Strategic considerations ▪ High returning asset with significant exploration, ▪ Outstanding drilling results in FY20 appraisal and development potential ▪ 75 wells drilled, including 26 horizontal wells ▪ Operat
Slide 27: Western Flank Oil
Western Flank Oil Estimated Ultimate Recovery has more than doubled over past 4 years, production has doubled over past 2 years Western Flank net 2P Estimated Ultimate Recovery and Operated Western Flank gross average oil cumulative oil production (MMbbl) production rate (kbbl/day) 100 25 20 80 Oil
Slide 28: Cooper Basin JV
Cooper Basin JV Focus on participating in high quality drilling campaign in FY21 FY20 outcomes Strategic considerations ▪ CBJV covers more than 16,000 km2 ▪ FY20 production of 8.7 MMboe was 6% higher ▪ Despite asset maturity, upside exploration than prior year opportunities continue to yield positiv
Slide 29: Updated 5 year outlook
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N Updated 5 year outlook
Slide 30: 5 year investment expenditure outlook
5 year investment expenditure outlook Prudent deferral of FY21 investment to manage external challenges More than 30% of planned FY21 expenditure deferred 5 Year Capital Expenditure Outlook1 ($ million) 1,200 ▪ FY21 was on track to be Beach’s biggest investment year >$300 million of planned FY21 gro
Slide 31: 5 year production outlook
5 year production outlook Production on track to deliver 37-43 MMboe in FY25 5 Year production outlook1 Investment deferral shifts production growth outlook (MMboe) 45 ▪ Production growth impacted by FY21 investment expenditure deferral and COVID-19 40 ✓ Offshore Victorian Otway wells now expected t
Slide 32: Low risk delivery of 37 MMboe by FY25, with upside
Low risk delivery of 37 MMboe by FY25, with upside Growth portfolio has optionality To deliver Key assumptions Requirements ▪ Stable gas production from Cooper Basin JV ▪ ~50 development wells/year in CBJV ▪ 33% exploration/appraisal Western Flank success rate ▪ High grading Western Flank exploratio
Slide 33: 5 year free cash flow outlook
5 year free cash flow outlook Revised investment profile, commodity price outlook set to deliver $2.1 billion in FCF 5 Year free cash flow outlook1 ($ billion) FCF outlook updated for revised timing, price assumptions 3.0 2.7 2.7 ▪ $2.1 billion in cumulative free cash flow forecast from FY21-25 2.5
Slide 34: FY21 guidance
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N FY21 guidance
Slide 35: FY21 guidance
FY21 guidance FY20 actual FY21 guidance Notes Production 26.7 MMboe 26.0 - 28.5 MMboe ▪ Underlying EBITDA guidance excludes any potential impact from Ironbark and Wherry costs (subject to drilling results) Capital expenditure1 $863 million $650 - 750 million ▪ Underlying EBITDA guidance includes $23
Slide 36: FY21 production guidance
FY21 production guidance COVID-19 risks have increased potential range of uncertainty FY21 production guidance split vs FY20 actual 30 Oil production 26.7 26.0 – 28.5 ▪ Forecast increase by maintaining Western Flank output above 20,000 BOPD 25 through FY21 (average) Gas and gas liquids production 20
Slide 37: FY21 capital expenditure guidance splits
FY21 capital expenditure guidance splits Investment focus remains on Cooper Basin and Victoria 16% 17% FY21 investment relative to FY20 Exploration/Appraisal Capital expenditure Development expenditure by type Stay in Business ▪ Reduction in Cooper Basin drilling activity ▪ Anticipated start of offs
Slide 38: Field operating costs
Field operating costs Targeting a 3-7% reduction in FY21 field operating cost/boe vs FY20 levels Average field operating costs/boe – historic and outlook (A$/boe) Opportunities for further reduction 10 in field operating costs 9.7 9.3 ▪ Beach has continued to drive costs out of the business post 9.0
Slide 39: Key takeaways
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N Key takeaways
Slide 40: Summary
Summary A high margin and high growth business Solid FY20 result in Entering FY21 with a strong Beach growth plans slowed, challenging conditions foundation but unchanged ✓ Responded quickly to COVID-19 threat ✓ Balance sheet in net cash position ✓ Planned FY21 capital expenditure reduced by >30% ✓
Slide 41: Q&A
F Y 2 0 F U L L Y E A R R E S U LT S A N D O U T L O O K P R E S E N TAT I O N Q&A
Slide 42: Appendices
F Y 2 0 F U L L Y E A R R E S U LT S P R E S E N TAT I O N Appendices
Slide 43: Kupe
Kupe Beach 50% interest and operator FY20 outcomes Strategic considerations ▪ FID of Kupe compression project ▪ Kupe supplies 15% of NZ gas market and produces ~50% of NZ LPG supply ▪ Compression required to increase production ▪ Long life asset generating positive free cash back to facility capacit
Slide 44: Bass Basin and SA Otway Basin
Bass Basin and SA Otway Basin Evaluating further gas development opportunities Bass Basin proposed FY21 activities SA Otway Basin proposed FY21 activities ▪ Complete concept select studies for Trefoil development ▪ Progress planning and design of Dombey 3D seismic survey ▪ Target FEED entry ▪ Integr
Slide 45: Western Flank Gas
Western Flank Gas Liquids rich gas production with expansion potential FY20 outcomes Strategic considerations ▪ Debottleneck condensate handling at Middleton ▪ Increased supply for the East Coast gas market ▪ Three new term GSAs in place covering CY20/21 ▪ Further upside potential within ex PEL 106
Slide 46: Frontier exploration
Frontier exploration Two material exploration prospects to be drilled in the next 18 months Ironbark – Carnarvon Basin (Beach 21% interest) Wherry – Canterbury Basin (Beach 37.5% interest, operator) ▪ Large gas prospect within 50km of existing NWS infrastructure ▪ Targeting deeper Mungaroo reservoir
Slide 47: Beach Energy portfolio
Beach Energy portfolio FY20 production Taranaki Bass Basin Western Basin Flank Otway Basin 26.7 MMboe Perth Basin Cooper Basin JV FY20 2P reserves Taranaki Bass Basin Western Basin Flank Otway 352 Basin MMboe Cooper Perth Basin JV Basin 47
Slide 48: Reconciliation of NPAT to Underlying NPAT
Reconciliation of NPAT to Underlying NPAT1 $ millions FY19 FY20 Change Net Profit After Tax 577 501 (13%) Gain on reversal of provision for onerous commitment - (38) Gain on asset sales (20) (18) Impairment of assets - 2 Tax impact of the above 3 14 Underlying Net Profit After Tax (NPAT) 560 461 (18
Slide 49: Underlying EBITDAX, EBITDA, EBIT, NPBT and NPAT
Underlying EBITDAX, EBITDA, EBIT, NPBT and NPAT1 $ millions FY19 FY20 Change Underlying EBITDAX 1,375 1,129 (18%) Exploration expense - (21) Underlying EBITDA 1,375 1,108 (19%) Depreciation and amortisation (527) (455) Underlying EBIT 848 653 (23%) Finance expenses (62) (16) Interest income 4 2 Unde
Slide 50: AASB 16 lease impacts
AASB 16 lease impacts Adopted 1 July 2019 FY20 Financial Statement disclosures Net impact of AASB 16 ▪ Accounting change only: ▪ Lease assets $59m o No net cash impact Balance Sheet ▪ Lease liabilities $62m o NPAT impact of $2m decrease o Immaterial net asset impact ▪ Depreciation of lease assets1 $
Slide 51: FY21 key milestones and catalysts
FY21 key milestones and catalysts1 FY21 expected timing Event Q1 Q2 Q3 Q4 Waitsia Stage 1 expansion completion Waitsia Stage 2 FID TBC Victorian Otway repricing completion TBC Ironbark 1 exploration well TBC Enterprise 1 exploration well TBC Artisan 1 exploration well TBC Geographe/Thylacine develop
Slide 52: Near term work program
Near term work program1 Flexibility retained Calendar 2020 Calendar 2021 Jul Oct Jan Apr Jul Oct Cooper Basin Joint Venture Western Flank 1 rig operating 2 rigs operating Victorian Onshore Enterprise 1 (exploration) Otway Basin Victorian Offshore Artisan 1 exploration well, followed by Geographe / T
Slide 53: Summary of East Coast gas contracts at June 2020
Summary of East Coast gas contracts at 30 June 2020 Beach gas sales to progressively be re-priced at prevailing market pricing FY20 Effective Price Market pricing End Asset Volume (PJ) Counterparty Basis Review Date FY21 FY22 FY23 FY24 FY25 date Oil-linked with Cooper Basin JV 16.6 Origin Energy1 Ju
Slide 54: Beach Energy Limited Investor Relations
Beach Energy Limited Level 8, 80 Flinders Street Adelaide SA 5000 Australia T: +61 8 8338 2833 F: +61 8 8338 2336 beachenergy.com.au Investor Relations Nik Burns, Investor Relations Manager Adam Stokes, Investor Relations Advisor T: +61 8 8338 2833