Beach Energy Limited · ASX:BPT
Beach Energy — H1 FY2018 Earnings Presentation
48 slides from Beach Energy's earnings presentation, Feb 19, 2018
Slide 1: FY18 Half Year Results
BEACH ENERGY LIMITED FY18 HALF YEAR RESULTS 19 February 2018
Slide 2: Compliance statements
Compliance statements Disclaimer Competent Persons Statement This presentation contains forward looking statements that are subject to risk factors associated with Beach prepares its petroleum reserves and contingent resources estimates in accordance with the oil, gas and related businesses. It is b
Slide 3: Contents
Contents Overview Matt Kay, Chief Executive Officer 4 Financial Morné Engelbrecht, Chief Financial Officer 12 Operations Dawn Summers, Chief Operating Officer 18 Exploration and Jeff Schrull, Group Executive Exploration and Appraisal 26 development Markets outlook Lee Marshall, Group Executive Corpo
Slide 4: Overview
FY18 HALF YEAR RESULTS Overview Matt Kay, Chief Executive Officer 4
Slide 5: An active and successful H1 FY18
An active and successful H1 FY18 Continued progress in the Cooper Basin and financial close of Lattice acquisition Profit/margin improvement continues Transformational Lattice acquisition Gross profit up 45% to $150 million Beach now a diversified, multi-basin producer with scale Operating cas
Slide 6: Financial headlines
Financial headlines Results extend turnaround performance from FY17 H1 FY18 Change from H1 FY17 Sales revenue $386 million +12% Profitability1 EBITDA $236 million +5% Underlying NPAT2 $93 million +5% Operating cash flow $174 million +13% Cash Flow1 Capital expenditure $124 million +72% Half year div
Slide 7: Operational highlights
Operational highlights1 Drilling and field development successes allow upgrade to full-year outlook Further HSE improvements, maintaining licence to operate Increasing Production and Drilling 48 wells drilled at a success rate of 83% Production (MMboe) Wells Drilled 10.6 10.6 – 11.0 98 – Potenti
Slide 8: Successful financial close of Lattice acquisition
Successful financial close of Lattice acquisition Diverse and multiple growth options Lattice assets uniquely aligned with strategy and core competencies ‒ ~70% of production operated Increased Cooper Basin JV Operatorship of Otway and Bass ownership interests basins OPTIMISE GROW EAST COOPER
Slide 9: Clear objectives to drive shareholder returns
Clear objectives to drive shareholder returns Enhanced opportunity set across asset portfolio Key Objectives Production outlook Achieve best in class HSE performance Optimised, lowest operating cost production from existing producing basins Optimise production and cash generation Cooper, Otway,
Slide 10: Synergy estimate increased to $50 million per annum
Synergy estimate increased to $50 million per annum Targeting to be on run rate by end of FY19 Following initial Lattice portfolio review, Phase 1 operating synergy estimate revised to at least efficiencies $50 million per annum (pre-tax) – Targeting to be on run rate by end of FY19 15.0 Additiona
Slide 11: Gas pricing
Gas pricing Market fundamentals and GSA terms support ongoing price increases Recent commercial negotiations Attractive price and structure for new Lattice east delivering revenue uplifts coast gas contracts… – Origin oil-linked historical GSA – Above Beach last 12 month average realised price –
Slide 12: Financial
FY18 HALF YEAR RESULTS FINANCIAL Morné Engelbrecht, Chief Financial Officer 12
Slide 13: Financial headlines
Financial headlines1 Cost discipline continues strong performance from FY17 Sales Revenue ($m) Gross Profit ($m) +12% Sales revenue +45% Average realised oil price Gross profit up 30% to A$88/bbl Cost discipline and leverage Average realised sales gas 344 386 to rising oil prices 150 and ethan
Slide 14: Financial update
Financial update1 $ million H1 FY17 H1 FY18 Change Underlying NPAT recognises: Production (MMboe) 5.5 5.2 (7%) – 30% increase in average realised oil price Sales volumes (MMboe) 6.4 5.7 (11%) – Flat operating costs despite a material Average realised oil price (A$/bbl) 67.5 87.5 +30% increase in f
Slide 15: Underlying NPAT drivers
Underlying NPAT drivers1 $ million 220 Underlying NPAT up 5% to 21.8 (51.0) $93 million 74.5 6.7 – 30% increase in average Gas and Other2 realised oil price ethane prices (33.9) – Higher gas pricing $/GJ Tax Oil and liquids prices H1 FY17 $5.95 – Lower production costs 110 H1 FY18 $6.46 (9.1) 88.7
Slide 16: Robust funding position
Robust funding position Capital management to prioritise re-investment, debt repayment and dividends 31-Dec-16 31-Dec-17 31-Jan-181 30-Jun-18 30-Jun-19 30-Jun-20 Net Gearing2 Net Gearing Targets2 Per capital management Net cash Net cash <33% <30% <20% framework Liquidity ($ million) Capital Manageme
Slide 17: Lattice performance overview
Lattice performance overview1 Solid performance driven by higher production, lower costs and higher liquids pricing Financial Performance Contributions (Net to Lattice) H1 FY17 H1 FY18 Change Production by basin Production by product Total production (PJe / MMboe) 44.2 / 7.6 45.8 / 7.9 +4% 8% 21% 11
Slide 18: Operations
FY18 HALF YEAR RESULTS OPERATIONS Dawn Summers, Chief Operating Officer 18
Slide 19: HSE performance
HSE performance Maintaining our licence to operate Safety Performance1 H1 FY18 performance (Beach) LTIFR1 6.0 Continuous improvement on FY17 HSE performance 70% 5.4 Reduction in Implementation of process safety framework underway LTIFR2 since FY13 Ongoing refinement to contractor assurance pro
Slide 20: Asset portfolio
Asset portfolio Expanded footprint with five production hubs and significant gas processing infrastructure FY17 Pro Forma Production1 Cooper Basin Cooper Basin Perth Basin Status: Production / Development Waitsia Working interest: Var. interests (op. / non-op.) Status: Development / Appraisal / Expl
Slide 21: Operations objectives
Operations objectives Driving shareholder value through safe, reliable and efficient operations Health, Safety and Environment People Maintain our licence to operate Embedding an effective operating model – No accidents, no harm to people or environment – Best in class capability – Compliance wi
Slide 22: Production and development
Production and development1 Successful field development activity improves full-year production outlook Production Cooper and Eromanga Basins H1 FY17 H1 FY18 Change (MMboe) 10.6 – 11.0 Total oil (kbbl) 3,094 2,647 (14%) 10.6 Sales gas and ethane (PJ) 11.7 11.8 1% 9.7 LPG (kt) 26.6 30.6 15% H2 Conden
Slide 23: Cost savings
Cost savings1 Cooper Basin JV cost turnaround continues $/bbl US$/bbl (15%) Cooper Basin JV field $/boe Cash flow breakeven2 (12%) operating costs4 (21%) World-class breakeven Lean well designs 25 sustained despite 22 19 17 Logging while drilling 17 increased activity Rig-move efficiencies 1
Slide 24: Lattice Review: East Coast
Lattice Review: East Coast Performance1 H1 FY18 Activity & Core Objectives Otway Basin (offshore, nearshore) H1 FY17 H1 FY18 Activity Production Geographe / Thylacene 12.7 PJe / 2.2 MMboe Otway gas plant asset integrity and reliability improvement 20.5 PJe/ 3.5 MMboe Halladale / Speculant 7.8 PJe
Slide 25: Lattice Review: West Coast and New Zealand
Lattice Review: West Coast and New Zealand Performance1 H1 FY18 Activity & Core Objectives Perth Basin H1 FY17 H1 FY18 Activity (Beharra Springs, Waitsia) Asset integrity and reliability improvement (Beharra Springs) Production 2.1 PJe / 0.4 MMboe 2.4 PJe / 0.4 MMboe Production optimisation impr
Slide 26: Exploration and Development
FY18 HALF YEAR RESULTS Exploration and Development Jeff Schrull, Group Executive Exploration and Appraisal 26
Slide 27: H1 FY18 drilling activity
H1 FY18 drilling activity1 Increasing well count and success rates 48 wells drilled at a success rate of 83% Drilling Results Nine discoveries from 13 exploration wells Success Basin Category Wells Successes Rate – Potential large gas field discovery at Haselgrove-3 Oil – Exploration 5 3 60% in
Slide 28: Defined pathway to sustain and optimise production
Defined pathway to sustain and optimise production Multiple development and exploration projects to optimise production and cash flow High impact exploration Step-change • Ironbark, New Zealand, Bonaparte growth • Multi-Tcf opportunities Low risk exploration wells Production • Enterprise, Artisan, B
Slide 29: Otway Gas Project
Otway Gas Project Low cost development with high graded exploration potential • Acquire 100% of acreage and infrastructure to allow alignment across the project with new strategic joint venture partner Objectives • Nearshore drilling campaign first to access lowest operating cost gas • Follow-on off
Slide 30: Perth Basin: Operatorship capability and portfolio depth
Perth Basin: Operatorship capability and portfolio depth Long standing, experienced operator with majority position in growth exploration acreage Waitsia and Beharra Springs Beharra Springs Long standing operator of Beharra Springs plant with extensive engineering and operational experience Beac
Slide 31: Perth Basin: Development Planning
Perth Basin: Development Planning Key juncture to re-evaluate, incorporate adjacent exploration potential and plan for success Perth Basin Development Planning Plan Seismic Beharra Springs Exploration Plant expansion Expanded 6-12 months mid-FY19 Deep FY19 follow-up FY20 project FY21 capacity •Incor
Slide 32: Illustrative work program
Illustrative work program Otway Basin: Otway Gas Project, Onshore Otway Basin Development / Appraisal Activity H2 FY18 H1 FY19 H2 FY19 H1 FY20 H2 FY20 FY21+ Development well – Blackwatch (nearshore) Inlet compression at Otway gas plant Development wells – Geographe/Thylacene (up to 5) Haselgrove-3 c
Slide 33: Illustrative work program
Illustrative work program Bass Basin: BassGas Development / Appraisal Activity H2 FY18 H1 FY19 H2 FY19 H1 FY20 H2 FY20 FY21+ Yolla wireline program Trefoil development planning Exploration Activity H2 FY18 H1 FY19 H2 FY19 H1 FY20 H2 FY20 FY21+ Seismic reprocessing New Zealand: Taranaki Basin (Kupe);
Slide 34: Illustrative work program
Illustrative work program Perth Basin: Waitsia; Beharra Springs Development / Appraisal Activity H2 FY18 H1 FY19 H2 FY19 H1 FY20 H2 FY20 FY21+ Beharra Springs compression optimisation Perth Basin development plan Waitsia gas development Exploration Activity H2 FY18 H1 FY19 H2 FY19 H1 FY20 H2 FY20 FY
Slide 35: Cooper Basin capital program
Cooper Basin capital program Multi-year capital program to sustain production over the longer term Key Objectives: Western Flank Oil • Focus on core play fairway exploration and development (Brikhead, Namur, McKinlay) • Full field appraisal and development plans to maximise recoveries and accelerate
Slide 36: Markets Outlook
FY18 HALF YEAR RESULTS MARKETS OUTLOOK Lee Marshall, Group Executive Corporate Strategy and Commercial 36
Slide 37: Eastern Australia
Eastern Australia Long-term market equilibrium dependent on contingent and prospective resources Total Demand (Domestic & LNG) and Supply Outlook Market now servicing domestic and LNG demand requirements – Three-fold increase in gas demand since 2013 – Stable long-term gas demand requirement of ~2
Slide 38: Eastern Australia
Eastern Australia GSAs provide ongoing exposure to an attractive long-term pricing outlook Current east Re-contracted / re-priced volumes Majority of existing east coast volumes coast volumes re-priced or re-contracted by end 2021 Annual step-ups and CPI adjustments of Lattice contracts continue
Slide 39: Western Australia and New Zealand
Western Australia and New Zealand Potential WA supply shortages to coincide with Waitsia / Perth Basin development WA: Total Demand and Supply Outlook Western Australia Current market dynamics influenced by excess supply from LNG proponents – Expected to be a short-term aberration Gas supply sho
Slide 40: Oil and liquids exposure
Oil and liquids exposure >50% of H1 FY18 pro forma revenue derived from liquids US$10 oil price increase +$65 million NPAT and East coast +$70 million operating cash flow • Predominantly long term, fixed price contracts with annual increments and market re-sets every three to four years H1 FY18 Sa
Slide 41: Key Highlights
FY18 HALF YEAR RESULTS KEY HIGHLIGHTS Matt Kay, Chief Executive Officer 41
Slide 42: An active and successful H1 FY18
An active and successful H1 FY18 Continued progress in the Cooper Basin and financial close of Lattice acquisition Profit/margin improvement continues Transformational Lattice acquisition Gross profit up 45% to $150 million Beach now a diversified, multi-basin producer with scale Operating cas
Slide 43: Appendix
FY18 HALF YEAR RESULTS APPENDIX 43
Slide 44: Reconciliation of NPAT to Underlying NPAT
Reconciliation of NPAT to Underlying NPAT Comparison of Underlying Profit H1 FY17 H1 FY18 Change ($ million) Net profit / (loss) after tax 103.4 95.7 (7.7) (7%) Remove acquisition costs - 9.6 9.6 Remove asset sales (52.9) (5.3) 47.6 Remove unrealised hedging movements 5.1 2.6 (2.5) Remove establishm
Slide 45: FY18 pro forma guidance
FY18 pro forma guidance Production guidance(1) Capital expenditure guidance(1) • FY18 pro forma production guidance of 25.5 – 27.6 MMboe • FY18 pro forma capital expenditure guidance of $405 - 455 million • Beach production guidance increased due to additional wells to be • Beach guidance increased
Slide 46: Expanded FY18 Cooper Basin program
Expanded FY18 Cooper Basin program Participation in up to 98 wells and active field development activity Wells $ million Exp. App/Dev Key Projects Western Flank Oil • Birkhead play fairway appraisal Ex PEL 91, 92 60 – 65 2 8 • Namur / McKinlay development • Artificial lift campaign • Growler Field d
Slide 47: Permit maps
Permit maps Kupe, Taranaki Basin NZ BassGas, Bass Basin Beach 50% and operator, Genesis Energy 46%, Mitsui E&P 4% Producing assets1: Beach 53.75% and operator, AWE Limited 35%, Prize Petroleum International 11.25%; Exploration permits1: Beach 50.25% and operator, AWE Limited 40%, Prize Petroleum Int
Slide 48: Beach Energy Limited Investor Relations
FY18 HALF YEAR RESULTS Beach Energy Limited Investor Relations 25 Conyngham Street Derek Piper, Investor Relations Manager Glenside SA 5065 Australia Mark Hollis, Investor Relations Advisor T: +61 8 8338 2833 T: +61 8 8338 2833 F: +61 8 8338 2336 beachenergy.com.au