Beach shares dive as oil fields dry up
Shares in energy provider Beach have plunged by more than 20 per cent after the company scrapped its five-year outlook, having revealed it expects to produce less oil from sites in South Australia.
Beach on Friday lowered its estimate of its oil and gas reserves at the Western Flank of the Cooper Basin by five per cent, or 17.6 million barrels of oil and 7.2 million barrels for gas.
The company at its first-half earnings had said it produced less oil than expected from its largest oil field at the Western Flank.
It has since gained more drilling data from the largest oil field, and others, that have confirmed the decline.
Chief executive Matt Kay said the oil fields were presenting challenges.
"The past five years has seen the Western Flank outperform our expectations, but we are now witnessing material decline from a number of fields," he said.
The company will explore more sites in the Western Flank for oil.
Meanwhile Beach lowered its oil production guidance for the financial year from a range of 25.5 million barrels to 26.5 million barrels, to 25.2 million barrels to 25.7 million barrels.
Earnings guidance dropped from a range of $900 million to $950 million, to $850 million to $900 million.
Royal Bank of Canada capital markets analyst Gordon Ramsay said downgrade in the Western Flank assets would likely lead to a write-down in their value for Beach's full-year earnings.
However gas production, which will not immediately be affected by the Western Flank findings, was a substantial part of Beach, according to Mr Ramsay.
Mr Ramsay said he expected Beach would earn more revenue from gas next financial year.
He said the company had a strong balance sheet and remained one of RBC's preferred stocks.
Shares were 24.11 per cent to $1.27 at 1536 AEST.
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