Monsters of Rock: Beached as, bro

Beach Energy unloads FY24 results, hits the ground with a thud
Victorian gas project underperforms
Gold miners salvage materials from bigger losses as iron ore and lithium miners slide

One of the ASX’s most notable energy players, Beach Energy (ASX:BPT), was slaughtered after revealing an 11% drop in underlying NPAT to $341 million in its full-year results despite a 9% lift in sales revenue to $1.8bn.

BPT saw production fall 7% to 18.2MMboe (million barrels of oil equivalent), in a year that saw it slash its workforce by 26% as it tries to roll down its breakeven oil price from US$54/bbl to US$30/bbl and below. Total headcount reductions of 30% are expected to be realised this half.

Boasting free cash flow of $163m before growth initiatives, that came alongside a 2c per share final dividend and 4c per share payout once the interim shareholder return was included.

But the bad news was hidden in the fine print, with MD Brett Woods revealing Enterprise field connected to its Otway Gas Plant in Victoria was smaller than expected, another hit for future supplies into the East Coast gas market.

“In the Otway Basin, connection of the Enterprise field to the Otway Gas Plant supported an increase in gas production in the fourth quarter. We also progressed the connection of Thylacine West 1 and 2 with the flowline manufactured and transported to Australia and first gas in H1 FY25 targeted,” Woods said.

“Disappointingly, over recent weeks we have observed pressure decline at Enterprise, which is consistent with a smaller reservoir than originally estimated. We have moved rapidly to assess the impact.

“This has resulted in a reserves revision which has been included in our annual reserves statement and audited by external experts. There is no impact to production guidance.

“The Enterprise field remains a valuable asset within Beach’s portfolio and an important source of new gas supply for the East Coast market.”

Beach’s 2P reserves have been chopped from 255MMboe to 205MMboe with 2C contingent resources sliding from 195MMboe to 181MMboe.

BPT, which counts Channel Seven owner Kerry Stokes among its key backers and also owns a share in the Waitsia gas field near Perth, expects to produce 17.5-21.5MMboe in FY25 with capex to come in between $700-800m ($963m FY24) at field operating costs of $14/boe and the breakeven of US$30/bbl.

The energy sector fell ~0.35% as of 3.50pm AEST, with Beach off more than 12%. A $1.1bn impairment also fuelled a 219% fall from a $401m profit last year to a $475m statutory loss.

But gold miners are on fleek

On the other hand the gold sector made some stellar gains, with Westgold Resources (ASX:WGX) up over 8% and Bellevue Gold (ASX:BGL) and Spartan Resources (ASX:SPR) not far off the pace.

US dollar gold prices are hovering around US$2430/oz, a touch under $3700/oz in Aussie dollar terms.

It comes after a magical week at Diggers and Dealers in Kalgoorlie for the traditional mainstay of the WA mining scene.

The ASX gold sub-index was up close to 1%, salvaging a poor day for the big miners, with the materials sector sagging by almost 0.6%.

$2.8bn capped Westgold is now up ~11.5% since completing its merger with Karora Resources, the owner of the Beta Hunt gold mine and Higginsville plant in WA, on August 2.

ANZ’s Daniel Hynes and Soni Kumari expect gold prices to keep tracking higher to close the year at US$2500/oz.

They think weak interest from western ETFs means there is slack for investment demand later this year to displace physical buying, which could soften due to high prices.

“The gold market is likely to take a cue from the Fed’s pivot to rate cuts. Cooling US macroeconomic data are increasing prospects for the Fed to start its monetary easing soon, but mixed comments from Fed officials could inject volatility in the short term. We hold a positive view for gold with a price target of USD2,500/oz by the end of 2024,” they said in a note today.

“Disinvestment in gold-backed exchange traded funds continues and speculative positions have increased. Lean levels of investment in gold are a potential driver, as they limit scope for heavy liquidation and suggest potential for fresh buying.

“Investment demand will be crucial this year to mitigate any fall in physical demand caused by higher prices.”

Gold miners have also been rising on hopes the US can ease monetary policy and avoid recession after US jobless claims fell last week, ANZ research said in a separate note.

But iron ore stocks were less rosy, falling into the red as portside stocks fell last week but still clocked up a 21% YoY gain at around 150Mt.

Singapore futures fell almost 2.5% to US$98.60/t, again testing their long-running US$100/t resistance.