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Kerry Stokes-backed Beach Energy has revealed further cost blowouts and delays at its key growth project in Western Australia, deepening investor uncertainty about the oil and gas producer’s outlook after the abrupt exit of its chief executive.
Brett Woods, a senior executive at Australian gas giant Santos, is set to become Beach Energy’s third CEO in just over three years in February after the board last week announced the immediate departure of Morne Engelbrecht, who had been in the job 15 months.
The Waitsia gas project in WA is among the Clough projects that has battled to keep workers.
On Monday, interim chief executive Bruce Clement told investors that Beach Energy’s 50 per cent share of the cost of the troubled Waitsia Stage 2 project in WA, which is being developed as a joint venture with Japan’s Mitsui, would be as high as $500 million – up from its earlier target of between $400 million and $450 million.
The Waitsia gas project in the Perth Basin had originally been due to this year start producing gas to convert into liquid and export overseas via Woodside’s North West Shelf plant. However, progress on the project’s construction has slowed following the collapse of engineering contractor Clough in December.
After reaching a deal earlier this year with Italian construction group Webuild to complete the project, Clement on Monday said the plan was now for gas to start flowing from the middle of the 2024 calendar year.
“The Waitsia joint venture and Webuild, our construction contractor, have worked to overcome a number of hurdles following the disruptions from Clough’s voluntary administration,” he said. “We’ve worked hard over the last few months to redirect the ship.”
Beach Energy, whose biggest shareholder is Stokes’ Seven Group Holdings, produces oil and gas from five basins in Australia and New Zealand. All of its gas on the Australian east coast is delivered domestically.
The latest Waitsia delay meant Beach would face a one-off charge of $65 million, the company said.
Analysts said Beach’s better-than-expected full-year underlying profit of $385 million would be overshadowed by softer production guidance for the 12 months to June 30, partly due to the Waitsia delay.
“Investor focus will be on the financial year 2024 production guidance missing consensus forecasts by 15 per cent at the midpoint,” UBS analyst Tom Allen said.
Beach Energy’s shares fell by as much as 6 per cent in early trade on Monday, before partly recovering to end the day down about 3.5 per cent.
“With a new CEO appointment last week, investors will also be looking for any change to strategic direction,” Allen said.
Royal Bank of Canada analyst Gordon Ramsay noted that Beach had put in place additional accommodation and night lighting for workers at its Waitsia construction site.
“Waitsia continues to drag out with all structural fabrication material now at site, but are the necessary workers now on site to finish building it?” he said.
Beach and Mitsui’s Waitsia expansion project, once completed, will mainly sell LNG to overseas markets, and will only supply small volumes of gas to domestic WA buyers until later this decade.
However, other producers are manoeuvring to fill a looming supply shortfall that the Australian Energy Market Operator is expecting up until 2026.
Strike Energy, which lost out to Gina Rinehart’s Hancock Energy earlier this year in the race for gas explorer Warrego, on Monday announced it would acquire Talon Energy. The all-shares offer will give it 100 per cent ownership of the small Waylering field in the Perth Basin and extra exploration acreage in the hotly contested area.
Further north, Chris Ellison’s Mineral Resources has bought small Kimberley oil producer Buru out of extensive onshore acreage along the Pilbara coastline.
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