Beach Energy Limited

Thank you for standing by and welcome to the Beach Energy Limited FY22 full year results conference call. All participants are in the listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by number one on your telephone keypad. I would now like to hand the conference over to Mr. Mone Engelbrecht, Chief Executive Officer. Please go ahead.

Good morning and welcome to the FY22 full year results presentation for Beach Energy. My name is Morne Engelbrecht and I'm the Chief Executive Officer of Beach. Joining me on the webcast today is our Chief Financial Officer Anne-Marie Barbaro and other members of the Beach Executive Team. For today's presentation I will first provide an overview of our results and progress for the year. Then I'll be over to Anne-Marie to run through the financials and then I'll provide an update on sustainability, our markets, and the outlook for FY23 and beyond. Following that, we will open the lines for Q&A. Before we commence, slide two includes our disclaimer, price assumptions, as well as information regarding our reserves disclosure. We will leave this with you to read in your own time. Our key message for today is that FY23 is the year of focused project execution as we deliver the foundation for growth in FY24 and beyond. For FY22, we delivered a strong set of financial results, and delivered on major project milestones. Operationally, albeit production was lower, key project milestones were delivered against a challenging backdrop of COVID, adverse weather events, labor shortages, and international supply chain pressures. Financially, the increase in demand and focus on energy security strengthened the market prices, supporting the growth in our earnings and cash flows. As this slide conveys, not so subtly, we are focused on delivering on our growth objectives. We are focused on growing our gas supply from each of our assets and materially from the Oxfam per person in particular. Growing our exposure to key gas markets, including expanding our share of the East Coast gas market and entering the international LNG markets. Growing our free cash flow and financial strength and growing our business sustainably. We are committed to the emissions reduction journey. To this end, I'm very excited to announce today our new emissions intensity reduction target. We're targeting a 35% reduction in our net equity emissions intensity by 2030. More about this later. Turning to progress in the field on slide four, it was a very productive year for BEACH with several highlights and milestones, and in particular, demonstrated our ability for delivering complex projects. The delivery of the biggest offshore drilling program in Beech and the Otway Basin's history was a clear highlight. The drilling campaign was completed safely and successfully with the campaign yielding one gas discovery and six development wells with an increase in reserves to boot. The first two development wells were connected to the Otway gas plant which supported a 47% increase in Otway Basin production. In the onshore part of the Otway, we also took a final investment decision for connection of enterprise discovery to the Otway gas plant. In the west, the transformational weight CSH2 project commenced with good progress made, the gas plant construction on the way, three of the six development wells drilled, and the LNG sale and purchase agreement with BP now also finalized and signed. Slide five summarizes a strong set of financial results. While production was lower than last year, we did progress our major growth projects to start lifting our production to key oil, liquids, gas and energy markets. We are reporting material improvements in earnings and free cash flow before major project capex with revenue from our operations hitting an all-time high. Results demonstrate the benefit of Beecher's diverse asset portfolio and strong leverage to commodity prices. We also ended the year in a net cash position with liquidity of $760 million, and this is after our biggest CapEx year on record as well. The board declared a one-tenth final dividend with our current focus remaining on prudent balance sheet management as we deliver on our major growth projects. Turning to slide six, which summarizes our FY23 activity, our overarching objectives are clear and aligned with our strategy. In FY23, there will be much focus on completing the bulk of the work programs in Otway and Perth basins. We're also very focused on maximizing plant output and extending asset lives through ongoing work over and optimization activities. Looking beyond project delivery, we will continue planning for FY23 drilling in the Bass and Taranaki basins to bring gas plants back to capacity rates. Exploration efforts will continue across the portfolio to drive longer-term growth and potential facility expansions with Perth Basin Exploration Drilling to commence in FY23 and Otmey Basin Drilling Plan for FY24-25. As we grow, we do so sustainably with the progression of the globally significant Moonburst CCS project. East Coast and West Coast acreage is integral to our growth aspirations. Flight 7 touches on the East Coast Gas supply challenges have been well documented and the market fundamentals are attractive for BEACH. Our objective is to support the market through developing new resources of gas supply and have been investing to do so. The chart on this slide highlights our East Coast contracted and uncontracted gas exposure over the coming years. As existing contracts roll off and new enterprise and thylacine volumes come online, uncontracted gas volumes grow and coincides with already tight market fundamentals. We are therefore well positioned to realize our gas growth and play our part in providing energy security for decades to come. Slide eight summarizes an exciting milestone which we announced last week, the signing of the LNG sale and purchase agreement with BP. This is a highly valuable contract which will provide a material revenue stream to BEACH over its five-year term. In summary, BP has committed to buying all of Beecher's share of waste energy volumes up to 3.7 million tons. With this into context, this is equivalent to roughly 200 million MMBTU of the SBA in line with the type of contract you would expect us to enter into considering the current backdrop of the market. Pricing is based off a mix of JKM and Brent linkage with full upside exposure and also leverages BP's leading LNG shipping capability and cost structure. We also have downside price protection, which in itself delivers a commercial rate of return on our own investment. Beyond pricing, the SPA contains terms, conditions, such as flexibility to align first LNG sales with weightier stage 2 commissioning. We are very excited to have BP as a long-term partner and look forward to delivering our first LNG cargo. Slide 9 is important as it highlights our target production of up to 28 million barrels of oil equivalent by FY24. Although we maintain our target, we note that this is dependent on the successful delivery of our major projects being on time and without any adverse or unseen events. The main drivers for reaching the target can be summarized as follows. Overall, it assumes performance in line with forecasts for all of our current assets, including production remaining flat in the Cooper Basin. In the Otway Basin, it assumes production will benefit from the greater well deliverability from the start of the FY24 year from the thylacine and enterprise wells. Customer nominations for the AGP is also assumed to be in line with a full well deliverability and therefore above take-up pay levels. And in the Perth Basin, we are targeting steady production before first gas from the wait-year stage 2 expected in the second half of calendar 2023. Turning now to slide 10, which summarizes reserves and resources movements during the year. Reserve additions this year was challenging while development projects were progressing with a lack of exploration in FY22 outside of the Cooper Basin. This is a key issue which we'll be addressing in FY23 and 24. The decline in reserves was mainly driven by production and reclassification of Bass Basin reserves as we flagged in May. In the Cooper Basin, revisions were due to outcomes from work programs during FY22, including poorer than expected fracture stimulation results in the Balgon field and infill drilling at the Caledina field and production performance at Bauer. At Bauer, production was underperforming due to higher than expected water influx from the Namur to the McKinley Reservoir. This was remediated by reinstating the water producers to cool water away from McKinley. This has improved production performance, but not yet corrected it completely. We are committed to growing our reserve space with the Perth Basin Exploration Program commencing later this year, being the next major catalyst for reserve additions. We're also announcing our inaugural Cooper Basin Carbon Storage Reserve. I'll finish this first section with health and safety and environment on slide 11. Recorded pleasing outcomes this year, particularly given it was a year of record hours worked across the organization, more than 3.3 million hours. Highlights included a number of safety awards, extended injury-free periods, and significant reduction in spills. We maintain our focus on continued improvement, and I thank all of our people for their dedication, demonstrating through action that safety does take precedence in everything we do. I'll now hand over to Anne-Marie to talk through the financial results. Anne-Marie.

Thanks, Mornay. Good morning, everyone, and thank you again for joining us today. I have the pleasure of speaking to you today to provide an update on a strong set of financial results for FY22. Turning to slide 13, and as Mornay has already highlighted, BEACH ended FY22 in a strengthened financial position setting us up well to deliver our growth projects in FY23 and beyond. Beach reported operating cash flow of $1.2 billion with $752 million free cash flow pre-growth expenditure. We are fully funded to deliver the growth agenda for FY23 with a liquidity of $765 million at year-end, and we are targeting a net cash position throughout FY23. Our results this year again demonstrate capital management discipline, which is particularly important during periods of heightened capital expenditure. As we complete our current major growth projects, we target growth in free cash flow in FY24. Slide 14 sets the scene with our production figures for FY22. This year we produced 21.8 million barrels of oil equivalent, which was in line with guidance. We have diversity of production from five basins and our gas to liquid split is now 65% to 35% respectively. Slide 15 highlights a strong set of financial results which demonstrate the benefit of BEACH's diversified portfolio and diversified exposure to energy prices. Cash from operations jumped 61% to $1.2 billion with stable cash flows from our fixed price CPI-linked gas contracts which delivered approximately 31% of total revenue. Meanwhile, unhedged exposure to oil and liquids underpinned the material increase to revenue. We announced an underlying net profit after tax of $504 million, up 39% on the previous year, and underlying EBITDA of 1.1 billion, up 17% on FY21. We announced a final dividend of one cent per share, fully franked, While we complete our major growth projects, we consider it prudent to not increase the dividend for this period. Slide 16 shows the comparison of FY22 underlying NPAT to FY21. The 15% rise in revenue during FY22 was primarily driven by a 79% increase in the realised oil price. Reduced depreciation is the result of lower production volumes. and lower exploration expense is the result of FY22 exploration activities being capitalised in accordance with our area of interest policy. The increase in cash costs was primarily driven by a 56% increase in royalties and a 45% increase in third-party purchases, both driven by increased commodity prices. Tariffs and tolls were 24% higher than FY21 driven by the successful arbitration outcome in relation to carbon recognised in FY21. Restoration expenditure of $30 million reflects the increase to restoration provisions in relation to assets in abandonment phase in the Cooper Basin. Slide 17 highlights our strong cash position with cash reserves of $255 million at the end of FY22. As mentioned earlier, operating cash flow of $1.2 billion was up 61% on FY21. This cash flow included $110 million of income tax paid and a $42 million receipt for settlement of the carbon tax arbitration. Our free cash flow pre-major growth expenditure was $752 million. Turning to slide 18 and you can see our balance sheet remains in great shape with a net cash position of $165 million at the end of the year and total liquidity of $765 million. During the year, we successfully refinanced our debt facility and upsized it to $600 million with improved terms and margins achieved. This means we're well positioned to fund our future growth strategy, including the committed capital for the connection of the thylacine wells and enterprise discovery in the Otway Basin, Waitier Stage 2 plant construction and development drilling, and Moomba CCS. FY23 will be a capital-intensive year, which will see the bulk of the work programs for our major growth projects completed. This sets the foundation for targeted growth in production and cash flow in FY24, which has been our clear focus over recent years. With that, I'll hand back to Mornay.