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.

Thank you, Brett. Good morning all. Thank you again for joining us today. I'll begin with slide 13, which shows our headline financial metrics. As Brett mentioned, our first half results were influenced by lower production, largely due to customer nominations and planned gas plant downtime. Despite lower production, the weightsier LNG and condensate cargos contributed a 4% increase in sales volumes to 11 million barrels of oil equivalent and a 16% increase in revenue to $941 million. The weightsier cargos saw our product mix shift more towards liquids, which accounted for 67% of first-half sales revenue, with gas accounting for 33%. For reference, in the prior corresponding period, the split was 59% liquids and 41% gas. Underlying EBITDA of $488 million was in line with the prior corresponding period. Higher revenue for the half was offset by higher cost of sales, with an increase in third-party purchases and inventory movements, largely driven by the weightier LNG and condensate cargoes, and higher operating costs in the Cooper Basin joint venture. Underlying NPAT was down 10% to $173 million due to higher DDNA from the change in production mix and higher Cooper Basin JV costs, as well as adverse FX movements. Statutory NPAT was impacted by the impairment charge we announced during January, the charge of $721 million before tax or $505 million after tax related to the following carrying values. In the Cooper Basin, we recognised a $468 million impairment charge on our producing assets, largely driven by a forecast increase in Cooper Basin JV operating and capital costs. For our exploration assets, a $178 million impairment charge was recognised to impair the carrying value for western flank exploration and a $68 million impairment charge recognised for the SA Otway exploration carrying values. A $7 million impairment charge was also recognized in relation to our Bonaparte exploration carrying values. It's important to note that the impairment charges are non-cash and do not impact our underlying earnings, which I'll now touch on. Slide 14 shows drivers of the 10% decline in underlying impact from the first half of FY23 to the first half of FY24. I've already touched on a number of these, but to summarize, Revenue was higher due to the weightier cargoes, although this was partially offset by lower production due to lower customer nominations in Otway. Cash costs were higher due to higher third-party purchases associated with the weightier cargoes and higher Cooper Basin JV operating costs. Inventory movements were higher again due to the weightier cargoes, as well as timing of other liquids liftings. We saw higher DDNA from a change in production mix and higher Cooper Basin JV costs and adverse FX movements were experienced. Turning to slide 15, which outlines movement in cash, which resulted in closing cash reserves of 226 million. During the period, net operating cash flow of 350 million was generated and debt drawdowns of 315 million were made. These inflows funded a capital intensive period with cash spend of $603 million for the half. In FY24, capital spend is skewed towards the first half, largely due to drilling across the western flank and coupé, which were conducted in the first half, and elevated major project activities as we work towards our first gas targets at Enterprise and Waitsia. On slide 16, you'll see that our balance sheet remains strong, with $446 million of available liquidity and net gearing of 12% at the end of the period. Our financial position allows us to maintain flexibility as we balance investment in growth with increasing dividends to shareholders. In recognition of this, the Board has declared a 2 cent interim dividend. As we move towards a period of strengthened free cash flow in FY25, once our major growth projects in the Otway and Perth basins come on stream, we have the capacity to pay higher dividends to shareholders in line with our capital management framework, while retaining optionality for growth. On that note, I'll now hand back to Brett.

Thanks, Emery. We'll now have a quick look at the remainder of financial year 2024 and activity across our portfolio. Slide 18 sets out our FY24 full-year guidance, which reflects performance from the first half and expectations for the second. The guidance is presented in our recent quarterly report. For production, the top end of the range was reduced with full year guidance now 18 to 20 million barrels of oil equivalent, which is largely the result of Otway customer nominations in the first half of FY24. For capital expenditure, the bottom end was increased with full year guidance now 900 million to 1 billion as we deliver our key growth projects. A breakdown of production and capital expenditures by type and basin can be seen set out on the slide. Before we move to Q&A, a quick reminder of why we see a compelling outlook and value proposition for Beech, which sets us apart from our peers. First, as we complete major projects this calendar year, you will see the long awaited step change in production and cash flow, which sets us up nicely for material growth in FY25 and beyond. Second, Beech has exposure to key markets with strong fundamentals, which will continue for decades to come. as the energy transition plays out. Third, our financial position is strong, and we are committed to disciplined OPEX and capital deployment. Fourth, the imminent step change in cash flows provide flexibility to balance increased dividends for shareholders and in line with our capital management framework whilst retaining optionality for growth. Fifth, our existing portfolio of quality assets has several meaningful opportunities for organic growth, And lastly, we have emissions reduction projects underway which support our decarbonisation and sustainability objectives, being well advanced against our 2030 commitments. So in closing, beach is poised for a big year ahead for the rest of 2024, with new gas supply coming to market at Coupé, Enterprise, Waitesira and Thylacine West. I'll now ask for the lines to be open for question and answer.

Thank you. If you do wish to ask a question, please register by pressing star then 1 on your phone. If you wish to cancel, you can do so by pressing star 2. And if you are on a speakerphone, please pick up your handset before asking your question. Your first question comes from Tom Allen at UBS. Please go ahead.

Good morning all and congratulations, Brett, on your appointment and first set of results. Just regarding the strategy review focused on cost and capital discipline, As a new CEO, can you expand on your specific ideas for this review and where the cost-out initiatives might come from? You mentioned in the presentation there's a hold on exploration drilling in the western flank, but where else might savings come from?

Yeah, I think from my perspective, Beech needs to position itself as a low-cost operator and I dare to comment that we aren't that at the moment. We have an organization that was built up on the basis of a large project delivery and execution, and we need to get ourselves leaner in those spaces as those project ends. But critically, we need to get into looking how we do things. It's the structural improvements that we need to build into the organization. We need to look at our simplifying our systems and our processes to make sure that we can deliver things in a more nimble and timely manner. we're kind of getting to that position where I'd say we're doing a little bit too much business with ourselves. So my focus will be on making sure the organisation is fit and right size for what we need to do moving ahead, that our operator cost base is under control, that we work with our joint venture partners to be constructive in working with them on their cost base, that we can look at growing our margins and delivering more value to shareholders.

Thanks, Brett, for that, Carla. That's fantastic to hear. Just a second question, if I may. With the big step change in free cash flow expected now inside of 12 months, what are your early thoughts around the potential uses of cash in regard to how the team are thinking about returning cash to shareholders compared to investing in new growth?

I'm absolutely remaining committed to our 40% to 50% of free cash flow expected dividend policy as the board announced over the previous years. I think that's important. It's a great value proposition for shareholders in Beach. One of the other great opportunities we have is we are uniquely positioned with a very strong balance sheet and sitting in that kind of between small cap and major organisations that we're well positioned to take advantage of any assets that may come free. My mission, though, isn't to kind of jump into something blindly. We'll only ever take a disciplined approach to execution and look for those assets that add the most value to our organisation as they come available.

Thanks, Brett. That's helpful.

Thank you. Your next question comes from James Redford at Bank of America. Please go ahead.

Hi, Brett. Congratulations on the role as well. And thank you for your comments regarding your priorities for the company, which is very, very useful. Two questions, please. First one is just on the Otway, just a housekeeping question just in terms of the take or pay volumes for calendar 24 with Origin Energy from the Otway. Just wondering if you could please confirm what that number might be, please.

Unfortunately, I can't give you that number. So what I've tried to do is is de-risk the volumes a little bit through the statement. You know, the take-or-pay levels have increased, you know, by effectively twice, two times, 50%. And the real exposure that Beaches had in the Otway is having such a vast range between its take-or-pay levels and what the plant can deliver. So a significant increase in that take-or-pay reduces our, or makes it much more clearer when we put production guidance out that we'll be able to hit those targets. And the additional benefit here is we've been able to achieve an excellent arrangement on the enterprise gas that has, again, a solid foundation of take or pay and does give us exposure to the market with some ability to trade some spot as well. So with the growing take or pay out of the existing GSAs plus the additional take or pay out of enterprise, it gives us a much more solid foundation of the proportion of gas in the hot way that we can deliver readily to the market and then still giving us excellent exposure to value through spot.

Great, thanks Brett. Second question is just relating to the MIMBA CCS project. First injection is due mid-Central 24. How quickly will it ramp up to nameplate capacity of 1.7 million tonnes and just checking, did you say that would offset a third of Beech's equity based emissions? At full capacity. Thank you. Yeah, cheers, James.

Yeah, that's right. The Moomba CCS project gets us a long way to our 2030 targets, and it reduces our equity emissions by 30%, which is a fantastic single project to deliver that. And as you mentioned, we are on track, the operator, Santos, obviously, is on track to deliver that project in the middle of the year. I haven't got specifics on the ramp-up timeline. I'm sure that will come to hand as we get closer to execution. Okay, thanks, Brett.

Thank you. Thank you. Your next question comes from Adam Martin at E&P. Please go ahead.

Yeah, morning, Brett. Morning, Anne-Marie. Just back on weights here, Brett, well done on your role, but you talked there just about compressed commissioning activities. Can you just give us a bit more colour on what you're talking about there, please?

Well, as we go into, or as any project goes into the late stages of construction and commissioning, we have four banks of compressors. Over the last few years, there has been some supply chain challenges, which the operator or the contractor is working very hard on. So I think for me, if I was to think if there was any timeline to be focused on, I feel quite confident about our mid-year gas export timeline. And then it's just, you know, we'll start with one compressor on and then we'll cycle to two compressors and three compressors. and ball compressors as we ongoing execute the ramp-up and commissioning of the project. That timeline is really depending on, you know, just how everything comes together at that time. So we're not speculating on that at the moment. And WeBuild are working closely with Beach and the operator in Mitsui to make sure that that is the shortest possible timeframe to do it safely and sustainably.

Okay, thank you. And just a second question back on the strategy review cost out. I mean, you're obviously at Santos in that 16 and 19 period when that company got, you know, they got very good at drilling wells, basically lowered capex considerably and also, you know, lowered opex. Is there any sort of learnings from that process in the way that you're tackling this strategy review?

Thanks. Oh, absolutely. Yeah, I had the fortunate position of sitting over the top of the Cooper Basin during 15, 16 and 17, and worked very closely with Kevin on it, which was a very effective cost out and efficiency program. And one of the key learnings we got from that, that it's not just about removing contractors and bringing them on next time you drill a well, it's really trying to focus on how structurally you do things different. So I often use this language, which is structural cost out. So things that we can put in place that when we continue to execute, they don't come back. Operating more efficiency through our compressors, simplifying our operations, more remote operations where applicable. These types of things can really affect positively our costs. And then similarly, I've got a very, very good relationship with Kevin and Santos, and we're going to work very closely to make sure that we achieve our cost objectives over the next few years.

Okay, that's great. Well done.

Thank you. Your next question comes from Dale Conders from Baron Joey. Please go ahead.

Good morning, and again, congratulations on the role. Just hoping you could expand again on the strategic review underway. You've called out the Bass Basin Cost and Operational Reset. What is this, Brett? And also, when you think about operational efficiencies, What other assets are you challenging in that operational efficiency review? Is this potentially weightier debottlenecking or what's involved?

Well, weightier debottleneck is already part of the plan. We're working with the operator on what that's going to look like. But for me, if I can break it into two sections, my primary focus at the moment is what I can control. What I can control is our costs. So we'll be looking through our whole way operator position, our Cooper Basin operator position primarily, and obviously our New Zealand operator position. And then working closely with our second tier, which is influencing Mitsui and influencing the SABC joint venture. We also have our own operations in WA, which we're also actually really good on cost. I think there's parts of our organisation that are very cost-focused, but I want to kind of bring Beach back to its original pioneering spirit, its spirit of being able to do things efficiently and quickly and leanly and then be ready to grow and pounce when it's right. You know, another way to put it, Dale, is I want to earn the right to invest and I want our organisation to be fit and ready to invest. And at the moment, I think we're a bit far from that. So my mission is to focus the organisation, get it lean, get it fit, and really kind of emphasise that cost is a priority for us.

Sounds great. On that thought process, the sustaining capex base for beach has been quite high historically, potentially anything in that $300 million to $500 million per annum. Is that something also we'll focus?

Well, that's at the heart of it really, Dale. Just so everyone's clear, our exploration drilling in the Cooper Basin sits in sustaining. So the numbers you see at the moment for the FY24 includes the second half of last year's calendar. I'm getting confused with all the financial years and calendar years, but in the second half of last year, they executed the wage year program with all the exploration drilling. So we're not going to see that in the next part of this year. And the coupe drilling also came in the second half of last year, and we won't see that kind of expenditure in the first half of this year. So my mission is to get that sustaining capital under control and at a level that supports making sure that we grow our margin across our business, doing it safely and sustainably.

Okay, thanks. Sounds good.

Thank you. Your next question comes from Saul Kevonich from MST Marquis. Please go ahead.

Thank you, Brett. A couple of questions, if I may, and perhaps just a broad one. I think you're the first CEO of Beech with a very strong technical background, essentially since Beech is the company it is today after the Lattice acquisition. I'm keen to get your sense on looking at subsurface and technicals in particular, what surprised you to the downside and the upside since you've got your feet under the desk over the last few weeks?

I think on the upside, probably the quality of the people. You know, I walked into an organisation in the last two weeks and I've wandered around and I've met nearly everyone here in Adelaide and met most of the people in Perth. And there's a lot of capability in this organisation. And I think that is exciting for me because... you know, to drive the outcomes that we need to deliver, you know, it starts with having a high-performing, highly capable organisation. And then when we look at opportunities, I remember, and you remember this well, Sol, middle of last decade, when we kind of broke apart the Cooper Basin and went after it again, we spent a bit of time getting our inventory right and then we had a fantastic era of drilling across the Cooper Basin. You know, I believe... In the Cooper Basin, nearly every time anyone puts a hole in the ground, we end up finding some form of hydrocarbon. But what we've had is we've seen our success rates dwindle a little bit over the last 12 months. And I think that's a function of a lack of inventory. So the reason I've pressed pause on exploration drilling in the Cooper Basin is to give a very capable subsurface team time to catch up with the drill bit and put their best foot forward and what is the next phase of exploration drilling across the western flank because those barrels deliver a lot of value for our organization. So they're very important barrels. So we need to get that right. And then if you look at the, you know, I'm quite amazed with the scale and this success across the Perth Basin. For me, there's great exploration opportunities there for us and I've got a great relationship with the folk at Mitsui, so we're going to work even more closely than we have in the past to deliver value for our assets and value from the Perth Basin.

Are you confident that Waikiki is going to not slip towards the last quarter and is actually going to be able to deliver a full nameplate capacity of the new plants being built?

Yeah, a couple of bits on that. So, you know, from my meeting so far with, which has been one, and kind of a detailed review with the project team, they have all the elements lined up to be able to deliver as per the guidance, which will get exporting gas in the middle of the year. And I think, so I pushed back on that and said, well, what could go wrong? What are the elements? And then Clough and WeBuild took me through a range of mitigations that they're putting in place. if anything can slip. So in terms of confidence, I do have confidence in our RFQ and our gas export dates. I think for me, the risk that I'd like to highlight is probably just the ramp up time. Is it going to be one month or two months or three months? I think because, and one of my challenges there is the Northwest shelf has announced that they're having a shutdown in August. So, you know, I'd love to get all the compressors all ramped up at full rates before that shutdown. But it may be that we only get one or two of them ramped up and executing. So for me, that's kind of one of the probably more important risks in the second half of this calendar year is what's the ramp up going to look like? And then when the Northwest shelf comes back online, how quickly can we get to full rates? In terms of the gas, we've got enough gas to deliver the full rates. We've got enough gas to fulfil our contracts. So I'm quite confident in where we're heading with Waitsia.

Great. I'm going to sneak a quick one in as well, a fast one. Is this good for any more LNG cargos to be exported before official start-up of the plant?

You know, I think one of the great things that we have, and certainly from one of my observations, is we've got some real strength in marketing and trading. And because we've got two domestic gas trains in WA, we are positioning ourselves to take advantage of whatever opportunities come up. I'm not going to say whether we can or we can't, but as you know me, I'll look at every opportunity to generate some value for the organisation. So we'll certainly be looking at things like that and, you know, driving as hard as we can.

Great. Thank you. That's all from me. Thank you. Your next question comes from James Byrne at Citi. Please go ahead.

Good morning. Congratulations on the appointment, Brett. Look, I loved what you said earlier about earning the right to invest. But, you know, as I look at the portfolio, there's not a great deal of 2C. Listening to your answer to Tom earlier, it does sound like M&A is an important part of growth when you do feel like you've got the right to invest indeed. You know, I'd contend, though, that you'd need quite a bit of acquisition to get to the kind of scale I think that an oil company needs to make it through the energy transition without destroying equity value. I don't think you're close to having that scale today. Feel free to push back on that. But, you know, I'd actually think that a better approach is to take your skill set, really lean out the organisation, spend a very limited amount of capital on the highest margin growth and excluding provisions, give the rest back to shareholders. Do you think that there's not merits to putting beach into harvest mode, given where the business is at today?

Well, you know, part of our strategic review is to look at all options. And one of them is to, you know, obviously to think about opportunities such as that. I would argue that there is great opportunities coming out. And though you've seen recently that the Woodside transaction with Santos hasn't gone ahead, I expect that there's a lot of other clever thinking going on next door to figure out how else to liberate value. So I'm not in a rush to do anything else. I'm going to be very prudent. We've got a very strong return capital to shareholders philosophy within the organisation. And we're going to lighten things up and see what delivers the best value and do things that are creative, not erosive of value. So, you know, nothing's not on the table. I certainly look at every opportunity to deliver value. Now, what I do have is a board and I believe a major shareholder that is very aligned to the vision that we're putting in place. And that's a positive for me. You know, I wouldn't have joined an organisation such as Beach if I didn't think there was real value in the share price, real value in the assets that it currently holds and a fantastic opportunity to try and grow value. You know, that's what I'm all about.

Got it. Okay. How would you describe the M&A market here in Australia from a competition perspective? Because on the one hand, it's much more difficult for juniors to be able to finance acquisitions, you know, related to things like abandonment provisioning. And, you know, at the other end of the spectrum, there may be less capital from offshore, but that's not to say that there's no competition in M&A, and I'd just love to hear your perspective.

Yeah, I think it reflects to the unique position that Beach has. We sit between the minors and the majors. We have a strong balance sheet. What we are seeing is... You know, if you compare the cost of doing M&A transaction in Australia, it appears to be lower cost than, say, doing it in other parts of the world. So I think there's an opportunity there for us to take some of that value and run with it. So I don't, you know, I think you've seen today's press, there are rumours of other players coming into the market, which is even more exciting for me to get competitive on what opportunities there are available.

Got it. Okay. And that's all from me from a questions perspective. But can I just applaud you for your early decisiveness on capital allocation around western flank exploration and pausing on outweighs these? Yes. I mean, I think they're both demonstrating the discipline that we're all hoping for. So thanks, Brett. That's all from me.

Cheers, gents.

Thank you. Your next question comes from Gordon Ramsey at RBC Capital Markets. Please go ahead.

Hi, Brett, and congratulations on your new role. Just very quickly on Coupe 9, you've indicated that, well, it looks like it's initially disappointing. Has that got to do with reservoir quality? Have you kind of been able to narrow that down in terms of what the issues might be?

Yeah, no problem, Gordon, and good to speak to you again. You know, Coupe 9 came in effectively just slightly under prognosis in terms of its... static subsurface properties. And we had initial rates that were really quite high and quite promising. But then we've seen what appears to be a bit of a restriction. So we're not sure if it's mechanical. We're not sure if it's a bit of dirt coming up out of the ground. It's unclear. So we're going to do some step rate testing across there to see if we can get that flow moving. I think there's a good chance that we'll be able to get this thing moving in the right direction. But what I want to do through my time here at Beach is just be very open and transparent and upfront with you. And at the moment, it is erring on the disappointing side, but we're going to do everything we can to get that fixed.

Excellent. And just another one from me. What does a modest gas price increase mean in terms of the lattice contract arbitration?

It means it's up. but it's not significantly up. To be fair, the original GSAs were struck at a pretty good price at the time. And we're pleased, given the lack of comparable contracts that have been executed across the market over the last few years, to get where we got to. But the critical part for me, the critical part for our organisation, is the significant growth in minimum tackle pay. that gives us so much more surety about our base volumes and it helps us to manage our costs as well. In the old way, if we can't get our volumes away, we get a relatively higher cost base. So for me, there's multiple avenues to managing costs and getting more out of the ground is certainly one of those good things. But I'm also a value player and getting access to that spot market, that tightening East Coast is really important So I'm going to look very, very hard on how to maximize our value from our outweigh assets, whether it be for ongoing GSAs or even more positioning against the spot market.

Just related to that, can you comment on how much of enterprise has been contracted in terms of what you expect the output to be from? I know it's a two-year contract, but what do you expect the output to be from that field roughly, just on a percentage basis?

Yeah. Unfortunately, I can't because a lot of that is commercial in confidence, Gordon.

Okay. Thank you.

Thank you. Thank you. Your next question comes from Nick Burns at Jarden Australia. Please go ahead.

Hi, Brett and Anne-Marie, and let me join the others in congratulating you to the new role, Brett. Apologies, I have another question on M&A and just about your comments around first wanting to earn the right to invest. How long do you feel it could take to earn that right? And you mentioned there could be some opportunities with your friends at Santos next door. I'm just wondering if that means that M&A may not be on the radar for some time, say this year. If you can just maybe just add some more colour on that. Thank you.

So to start with, I'm hoping that my intention will be at the full years to give a much clearer and firmer view on our strategy and our strategic direction. And I expect to be able to demonstrate some of the significant moves I've done on costs during that time. So I'm hoping that through action that you'll be able to see that I'll be earning the right. And I think we'll always be opportunistic. We've got a great balance sheet. You know, certainly it's not my focus over the next three months to four months to go and bite something off. But we'll always be looking at something that is really exciting. But, you know, good M&A requires you to deliver the synergy value from that transaction. I want to have an organization that can actually unlock that synergy value as well as grow that accretive value part of the story. I don't know if I have that today. We're going to work closely as a leadership team to make sure that we have that and that we're positioned for that. I think the message I want to give you, Nick, is I just want an organization that is disciplined and focused. I think that will come with time, hopefully not too long. But that's just absolutely my mission over the next six months.

That's clear. Thanks, Brett. Maybe just touching, this might be a part of your last answer, but you've called out margin growth as a key focus for you. Just wondering what you mean by that exactly. I'm assuming it's more than just lower costs. Can you talk about, you know, is it pursuing higher margin growth opportunities organically or inorganically? And maybe give some examples of how you think you can achieve that. Thank you.

Yeah, I think so. Obviously, margin growth includes costs. So that's one element. The other part of it is potentially getting more exposed to the spot market, you know, in terms of our commercial positioning. You know, I'm just weighing that up at the moment with the team on how we can, you know, you've seen in every market we're operating in, you're seeing tightening. So I see a very exciting future in the East Coast gas market, very exciting future in the West Coast gas market as well as internationally. So then, you know, I'll be chasing assets that have the ability to execute at low cost. Those things that we have advantage on, you know, we have excellent onshore operating skills. I must say our onshore operating team are trending towards low cost. We need to get that in all our offshore activities as well, which I think aren't trending towards low cost. So there's real good shoots in this organisation of capability. I can't understate the quality of the people that I've come across so far at Beach. And what I want to do is get them focused. And if we get that focus, we get those elements and costs, we get those more molecules to market in those higher growth markets, as well as looking at some simplification of our asset base and maybe chasing some, over time, some higher margin assets, that'll help our story and that'll help drive that kind of leveraged position that I'm trying to achieve.

That's great. Thanks, Brett.

Thank you. Your next question comes from Sarah Kerr at Morgan Stanley. Please go ahead.

Thanks so much and congratulations on your first result. I have two questions if I may. I was wondering if you could provide some colour on any consultations BEACH has had with the WA Government just on the possible relaxing of the domestic gas export ban and what could a possible lifting of the ban mean for BEACH?

Yeah, I can't really comment on any discussions with the West Australian Government. You know, we're in a great position that we have an ability to export gas from the White Sea field to the LNG markets, but I just want to reflect to everyone that we have two other gas facilities there, both serving the domestic gas market. You know, I think, you know, maybe I'll be a bit over-ranging here, but WA's got a lot of wonderful assets, and some of those assets are getting underutilised, like the North West Shoals. to deliver more gas to the domestic market, some of those smaller projects do need some exposure to export markets. So the irony here is giving more access to export will enable more domestic product. But I think we need to do that in a balanced way. And certainly as an organization, certainly me, I'm absolutely committed to servicing the domestic market as well as getting exposure to the export market. I think that makes practical sense.

Great, thank you. And could I direct a question to Anne-Marie? How are you thinking about the debt capacity running at 12% versus the 15% target Beech has? And how can headroom increase once Beech has earned the right to invest?

Thanks, Sarah. So initially when we put out our target gearing of 15%, we did talk about that being quite a modest gearing target to allow us the ability to stretch our legs further in the event that we did want to pursue any incremental growth. But currently at 12% at the end of the half, but obviously that's sort of as we are getting to the pointy end of delivering our major projects. So we do expect that to sort of come off quite quickly once those new projects are on stream. But we sort of talk about that 15% being a target there, but allowing us internally to stretch ourselves further if the right opportunity presents.

Great. Thank you so much, and congratulations on the results.

Thanks. Thank you. Your next question comes from Henry Meyer at Goldman Sachs. Please go ahead.

Morning, all, and Brett, congratulations again on the appointment. Two questions, if I can, just quickly. First one on, this could be early days, but your focus on exploration in the future strategy, you've pulled back some exploration in the western flank already. I'm interested if you could share some color on the flexibility you might have in exploration offshore Victoria. What's the firm and committed potential timeline for offshore gas Victoria drilling? And a lot of talk on inorganic growth as well as some opportunities popped up. Could you defer some of that activity or is it more or less locked in in 2025?

Start with the old way. We're currently doing a bit of a refresh as part of the strategic review. is to really have a deep look at what we're going to drill in the Otway Basin. Things like Artisan and LaBella are discoveries. They're all close to tiebacks. So we're just going to go and test the market for costs at the moment and then run the economics to make sure that those projects conform to our new model of disciplined capital deployment. And that's really important to me. And then similarly, we do have a great partner in OGOG, and we're looking at drilling a well with them later this year, next calendar year. Well, actually, sorry, I think it might be next year, next calendar year. But our challenge here is what are we going to do and what we're not, and I'm not going to do anything that is not value accretive. So we're having a good refresh at that, and I'll give a much more colourful view on the Otway exploration and development lens at the full year.

And a final quick one if I can. You mentioned you've got the other existing domestic gas plants in WA. The spot prices there and recontracted prices are shooting up or have been shooting up fairly significantly too. And the past speech has provided a bit of an indicative breakdown on contracted gas position on the East Coast. Can you talk to any notable change in your contracted gas position in WA going forward?

At this point in time, I can't. Sorry, Henry. Unfortunately, most of it is very commercially incompetent. What we have been doing, though, is we've been able to execute some great swaps that facilitate the LNG cargo, and we'll continue to look at every opportunity we can to deliver value through the market. Thanks, Brett.

Thank you. Your next question comes from Scott Ashton at SHA Energy Consulting. Please go ahead.

Good morning, Brett. Congratulations. Just two questions. With a fresh set of eyes coming into the business, where do you see the lower hanging fruit in the sort of cost optimisation for drilling vis-à-vis, say, Perth Basin versus Cooper? And then secondly, it's more of a technical question because it goes to optimising the molecules, those deeper discoveries around Bahara Springs, that's high-pressure gas, how do you sort of think about optimising the topside facilities which are sort of not designed to handle that high-pressure gas? Does that mean that the Bahara Springs facilities need some sort of optimisation? Thanks.

Yeah, so I'll start with the cost question. You know, before I joined BEACH, I heard much about... effectively the cost profile that Beach were executing program at and the cost profile others were executing the program at. As part of my strategic review, I've been working with some of our partners to kind of really get a clear view on where we're competitive on costs and where we're not. So I'm going to break that down in a lot of detail and work with the team to get that right. And some of that is associated with corporate overhead. So I've got to make sure that all parts of the business, a right size to make sure we were aligned to the cost objective that I want to drive. In terms of the variable pressure across the Perth Basin, you know, that comes with its own opportunities for us as well. Any modifications and dropping pressure down would be not hyper complex. So I'm not particularly worried about it. But, you know, we'll continue to... to explore and chase opportunities in the Perth Basin because it's certainly a critical market for us in the West and we do have a fantastic position and an excellent partner with Mitsui who has aligned with us on investing across that basin.

That's great. Thank you very much, Brett.

Cheers.

Thank you. That does conclude our question and answer session and our conference for today. Thank you all for participating. You may now disconnect your lines. Thank you.