Beach Energy Limited

Thank you for standing by and welcome to the Beach Energy Limited FY24 half-year results call. All participants are in a 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 the number one on your telephone keypad. I would now like to hand the conference over to Mr Derek Piper, Head of Investor Relations.

Please go ahead. Thank you. Good morning, all, and welcome to the Beach Energy Results webcast for the half-year period ending 31 December 2023. My name is Derek Piper, Head of Investor Relations, and here with me is Brett Woods, our Managing Director and CEO, and Anne-Marie Barbaro, our Chief Financial Officer. We released a presentation this morning which summarised our results, and we'll talk through that today. Brett will provide a highlight or an overview of the highlights, and Anne-Marie will touch on these financials. We'll then open the lines for Q&A, and we would ask if you could keep your questions to one or two each, say. That would be appreciated. We'll try to move through those fairly promptly. So on that note, I'll hand to Brett for an overview of the results.

Thanks, Derek. Hello, and welcome to Beach Energy's FY24 half-year results webcast. My name is Brett Woods, and I am the Managing Director and Chief Executive Officer at Beach. Joining me today is Anne-Marie, our Chief Financial Officer, to take us through the financials. Let me please start by saying it is a privilege to have been appointed to the role, and I've certainly started at an exciting time for Beech. We're on the cusp of completing a suite of projects that delivers material volumes of new gas supply to domestic and global markets. This near-term growth outlook, our sand financial position, and the prospects for transformational growth are what attracted me to Beech. The past few months while I've been transitioning, I've thought long about my key areas of focus. So, in short, my key priorities are, firstly, delivery of Waitsia, Enterprise, Thylacine West production, as per the schedule and capital guidance. Reducing our operating costs of the existing business. I am concluding a comprehensive review of the organisation and its cost base, specifically with a target to deliver disciplined, high-performance organisation. Critically, we need an integrity and safety-focused organisation who chases every molecule at the lowest possible cost. Margin growth is also a key mindset that I wish to unlock within Beach, effectively enabling Beach to be in the strongest position to take advantage of its unique financial and technical capability. This can unlock further organic opportunities and those large opportunities when the right ones are available. I want to maintain our strong balance sheet position. And finally, I want to deliver disciplined capital allocation with the focus of increasing our shareholder returns. Just a quick thank you to Bruce Clement for stepping up in the interim period while I've been on gardening leave. Bruce has overseen much progress across the business and has greatly assisted me with my transition. For today's webcast, I will provide an overview of the results and recent activities and an outlook for the remainder of this financial year. Anne-Marie will update on the financial results and we will finish with webcast with a Q&A. Slide two sets out the compliance statement, which I'll leave you to read at your leisure. Beach is getting closer to completing this period of capital growth expenditure with new production well at Coupe New Zealand, good progress at Enterprise and Wadesia. Our asset portfolio also provides several organic growth opportunities beyond the current drilling campaigns and performance enhancement initiatives. We're undertaking development studies on the Artisan and Labella in the Otway Basin. As we undertake these activities, we do so with a strict focus on sustainability and executing projects that are value accretive in order to support the energy transition. We have clear emissions intensity reduction targets and are progressing several projects, including the nationally significant Moomba CCS project. John Beecher's existing asset portfolio and opportunity set, our scale, position in the market, and our financial strength all position us well to pursue inorganic, growth aligned with our core competencies. We have commenced a comprehensive strategy review to align our organisation and the market on our objectives, an approach to growing our capital returns to shareholders and discipline growth. And I remain committed to our capital management framework of returning 40% to 50% of pre-growth free cash flow dividend payment. We look forward to communicating outcomes in the coming months. Turning to slide four, which details our health, safety and environmental outcomes, which are very mixed. Our personal safety performance reflects a disappointing result for an organisation that I know is much better than these numbers show. We have kicked off a major safety intervention, particularly with regard to our contractors, in an attempt to reverse this trend. However, on the positive, we have had excellent outcomes with our environmental performance, with the material reduction in hydrocarbon spills with a capacity of only 0.6 barrels being leaked and no significant tier one or tier two spills. Plant process safety performance was also strong with no incidents recorded. Again, with regards to personal safety, we're taking steps to investigate the cause of this, and I'll be leading our Stand Together for Safety campaign across all our operations to turn this performance around. There is a strong safety culture at Beech, so we must approve in this area. Slide five sets out emissions reduction progress. A key element of our decarbonisation plans is the nationally significant Moomba CCS project. Construction progress continued over the past six months as the joint venture targets first CO2 injection in mid-calendar year 2024. Once operational, Moomba CCS will abate roughly one third of Beech's equity emissions. In our operator business, we progressed several early stage projects. Beach has previously reported on the potential for CCS in the Otway Basin. Having completed the assessed phase of this project, this project does not currently meet our investment hurdles, and I am committed into maintaining discipline in our capital deployment. As such, we'll be putting this on hold for the time being. Electrification of our assets in the Otway Basin continues, as does the flare reduction project at Bahara Springs. Now turning to slide six, Anne-Marie, we'll talk through our financials in some detail shortly. So to summarise our results for the first half, we were impacted by lower production and a capital-intensive period as our major projects progressed. Production was down 11% to 8.8 million barrels of oil equivalent, primarily due to lower customer nominations in the Otway Basin. Despite lower production, sale revenue was up 16% thanks to our first weight-seer LNG cargo and a one-off weight-seer condensate cargo. we recognise revenue of $162 million for these cargoes. Underlying EBITDA was in line with prior corresponding period and our financial position remains robust. Accordingly, the board declare a fully franked interim dividend of $0.02 per share. In January, Beach announced a $721 million non-cash impairment of our Cooper Basin producing assets and exploration carrying goes across the western flank, SA Otway Basin, and Bonaparte Basin. Anne-Marie will break this down in more detail shortly. As you can see on slide 7, it was another period of key project milestones, both in the field and on the commercial front. I will touch on some of these in more detail a bit later, so for the time being, it is worth calling out just a few. Firstly, the team in New Zealand have drilled, completed and connected the Kūpei South 9 development well. The incident-free campaign was delivered in less than 90 days on schedule and on budget. The well is now cleaning up but producing at lower rates than expected. We're assessing the cause of this, including whether something may be restricting its flow. In the Otway Basin, the enterprise development is in good shape as we continue to target first gas in Q4 financial year 2024. During the first half, our agreement with local native title holders was concluded and we also completed tying of the pipeline to the Otway gas plant. We now await final regulatory approvals to complete well site construction activities and commence the flowing of gas. In the Perth Basin, our operator drilling campaign delivered gas discoveries at Trigg Northwest and Tarantula Deep and the development well at Bahara Springs Deep 2. We will soon be spotting the Redback Deep 1 gas exploration well testing the Kingia Reservoir immediately east of the Kingia Gas Reservoir in the Bahara Springs deep field. Still on drilling and in the western flank, we have completed the oil exploration appraisal campaign for financial year 2024. But the success rates were well short of historical averages. I intend to place a hold on exploration drilling in the western flank so that we can refresh the drilling inventory We will, however, remain focused on development and appraisal drilling. I remain confident that there is further exploration potential in the Western Plank to pursue in line with our approach to discipline capital deployment. On the commercial front, key agreements were struck during the half, which have materially enhanced the value of our assets. We were particularly pleased to conclude negotiations with Origin for the Otway Basin price review and a new agreement for the sale of enterprise gas. Our Otway Basin agreements now provide greater certainty for increasing production and higher prices in calendar year 2024 and beyond. These agreements were fantastic outcomes for Beech, so let me just touch on them in a little bit more detail now. So looking at slide 8 and the pleasing commercial outcomes we have recently achieved, production from Otway over the past year has been significantly constrained. Beecher said many times the legacy Origin Otway contracts and repricing are complex. The GSAs gave Origin significant flexibility. As we moved into calendar year 2024, this flexibility has been reduced and take or pay levels are more than 50% higher than calendar year 2023. When considering this greater than 50% increase, it's important to note that nominations in calendar year 2023 did exceed minimum take or pay levels. We now have greater confidence in guiding towards higher volumes and revenues in calendar 2024, namely from the higher take or pay I mentioned, signing the enterprise gas sale agreement, which includes a minimum take or pay volume and the ability to sell surplus enterprise volumes on a dayhead basis, And the new volumes expected online this year, including Enterprise in Q4 financial year 2024, and the Thales and West development wells in the second half of this calendar year. We have already seen offtake start to increase in 2024. Our Otway Basin acreage and infrastructure are valuable assets, which we expect will become more evident as 2024 progresses. Turning to slide 9 and an update on the Waitseer Stage 2 project, the first Waitseer LNG cargo and the one-off Waitseer condensate cargo were clear highlights from the half. Our strategy to mitigate past challenges by storing surplus gas from the Xyrus plant allowed us to fill an early LNG cargo and benefit from strong market prices. The image on this slide shows loading of the cargo, the first in Beaches history, a very important milestone for us. On my first Friday with BEACH, just last week, I attended an executive meeting with Mitsui WeBuild Clough and the lead project and operations staff of the Waitsia project. Within that meeting, Clough and WeBuild reconfirmed their commitment to the RFSU and gas export dates. Through what I observed as an acceleration of some of their critical path items, such as engineering sign-offs and compressed commissioning activity, I can support that the project timelines are still in line with Beech's market guidance of ways to being online in mid-calendar year 2024. Mitsui and Beech are very aligned to seeing that both dates and capital hold firm, as we'll quickly move into closing out the construction and progress commissioning activities. In terms of risks of these dates, with elements like engineering closeouts and commissioning, Clough took us through a range of mitigations And again, this gave me confidence to maintain our timing and capital guidance. In the Perth Basin, we've also been keeping busy with our operator drilling campaign. The program has so far delivered successful appraisal of the Bahara Springs Deep Field and gas discoveries at Tarantula Deep and Trigg Northwest. Bahara Springs Deep 2 confirmed gas within the King Ear Sandstone in the southern part of the Bahara Springs Deep Field. The primary purpose of the world was to maintain platter production at the Bajara Springs gas plant for delivery of gas into the domestic market. The Tarantula Deep discovery came in in line with expectations and can be developed together with the Bajara Springs Deep Field. The discovery is also encouraging for further near field exploration opportunities. At Trigg Northwest, we plan to flow test that discovery in Q4 financial year 2024 with the aim of providing information on productivity and connectivity of the reservoir. Results will form up for the next steps for further appraisal, exploration and ultimately development of this part of our acreage. Turning to slide 10 and a quick reminder that Beech sells its products into key energy markets which have very strong fundamentals. This diverse market exposure is a key element of our value proposition. Beach supplies gas to the East Coast, West Coast and New Zealand markets, and oil, liquids and LNG to global markets. Each market continues to play its attractive fundamentals with tightening supply and demand outlooks, as summarised on the slide. On the East Coast, our recent major investment in the offshore Otway Basin and Enterprise will yield a much-needed uplift in gas supply volumes for the market, and at a time when increasing tightness in gas supply is forecast. Similarly, on the West Coast, Beech currently has two gas plants delivering into the domestic market at Zyrus and Bahara Springs. And on completion of the Waitsea gas plant, Beech will also be delivering into the global LNG market. Before I hand over to Anne-Marie, a quick look at our priorities for the second half of FY24. In Perth, as we progress construction of the Waitsea gas plant, We'll also be taking production testing of Gynatrix and Trig Northwest to understand productivity of these discoveries and support development plans. In the Otway Basin, we are focused on a key number of priorities. Firstly, completing the enterprise development as we target first gas before the end of this financial year. Secondly, we're progressing the manufacture and installation of the replacement fire lines to the final two wells of the offshore Otway program, Thylacine West 1, And two, which we are targeting to be online in H1 FY25. And finally, we continue to progress early stage planning for developing the artisan and labella discoveries. Finally, as I mentioned earlier, we're currently undertaking a detailed strategy review focused on building a disciplined, low-cost organisation. We look forward to sharing the outcomes of the review in the coming months. On that note, I'll hand over to Anne-Marie for an update on our first half financial performance.