ASX:BPT
Beach Energy Ltd
Investment Summary
The fund managers believe that Beach Energy Ltd, currently trading at around $1.40, presents a compelling investment opportunity. In their opinion, the company is undervalued at a trading ratio of 6.6x 2024 earnings, particularly given its significant growth potential from liquefied natural gas exports. Despite facing challenges, including delays and contractor issues, the fund managers note that Beach has performed well and is positioned to benefit from ongoing demand for oil and gas, especially in non-OECD nations where consumption is expected to rise. Recent strategic reviews, including substantial cost reduction and leadership changes, have generated optimism. The managers highlight that Beach Energy is set to improve its financial metrics and strong cash flow, which may provide material capital management optionality. Given the positive feedback from site visits and stronger oil prices, the fund managers consider Beach Energy as well-positioned to participate in the consolidation of the Australian gas sector, especially under its current leadership.
Commentary From The Managers
Blackwattle Investment Partners
31 Dec 2024
$1.40
- BPT was the largest positive contributor to performance during the month.
- BPT rallied 13% in December due to positive feedback from a site visit and stronger oil prices.
- BPT is an Australian focused oil and gas player with assets on both east and west coasts.
- The site visit included the Waitsia gas field and plant in WA, which was highly anticipated.
- Despite struggles with the project, it has reached mechanical completion after delays and cost overruns.
- After underperformance in the last 6 months, the stock had a modest relief rally.
- There is still upside for BPT as they are seen as an ‘improving quality’ cyclical business.
- BPT is nearing the end of a multi-year, capital intensive growth journey to develop high value gas assets.
- This should enable BPT to generate improved financial metrics and strong cashflow, while creating capital management optionality.
- BPT is strategically well placed for consolidation in the Australian gas sector under strong leadership.
Blackwattle Investment Partners
30 Apr 2024
$1.61
- Beach Petroleum’s share price has declined due to delays in the Waitsia project in WA.
- Despite the delays, Blackwattle Investment Partners maintains that the investment case remains intact.
- Incoming CEO Brett Woods, formerly of Santos, has been selected by Kerry Stokes to lead a strategic transformation.
- The aim is to evolve Beach from an accident-prone explorer/developer into a focused, cash-generative producer.
- Key to this transition is the alignment of major shareholder, board, and management.
- Blackwattle Investment Partners anticipates insights from Beach's upcoming strategy day where Woods will present his plans.
Endeavor Asset Management
31 Mar 2024
$1.86
- Endeavor Asset Management identified relative value in Beach Energy compared to its peers.
- The company's share price rallied 20% following the announcement of the first stage of their strategic review.
- This strategic review included a 30% headcount reduction.
- Projected annual cost savings range from $24-50 million.
- Endeavor Asset Management continues to hold as they see potential in the company's strategy.
Milford Asset Management
31 Mar 2024
$1.86
- Performance for the month was led by Beach Energy (+14.7%)
- Beach Energy is leveraged to global oil markets
- Company operates in an extremely tight Australian domestic gas market
- Historical challenges include major downgrades to reserves, capex blowouts, and negative exploration results
- New leadership signals potential for positive change
- Encouraging results from the first stage of strategic review include significant cost savings
Collins St Asset Management
30 June 2023
$1.35
- Collins St Asset Management initially invested in Beach Energy in 2021 when the share price fell approximately 45% due to a production downgrade.
- The purchase was made at around $1.10, indicating the company was trading at roughly 5 times earnings.
- Significant growth potential was anticipated from their joint venture to export Liquified Natural Gas by the second half of 2023.
- Beach Energy's share price peaked over $1.80 but is currently trading around $1.40, following some setbacks.
- The company faced challenges, notably due to the collapse of Clough, the contractor for their major project.
- Collins St Asset Management believes the market continues to misunderstand the Oil & Gas industry.
- Despite the momentum towards renewable energy, demand for oil and gas is expected to grow.
- Oil remains the most commonly used commodity globally, and increasing energy needs persist, particularly in non-OECD nations.
- Beach Energy is currently trading at 6.6x 2024 earnings, which Collins St Asset Management views as too cheap.
- The fund manager maintains that Beach Energy is a worthwhile investment to hold.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.