BEACH Energy has made cuts of 20 per cent on its spending guidance for the second half of this financial year, deferring projects and reducing expenditure by $55 million to a range of $430-470 million in response to lower global oil prices.
Beach’s revenue for the December quarter was down 17% on the previous quarter, with the company reporting the lower oil price was partially offset by a weaker Australian dollar and more liquids in the sales mix.
Beach said its conservative approach to expectations for the projects on which it was not operator would lead to lower production in the second half relative to the first.
It said Santos had not yet provided guidance on their Cooper basin and south west Queensland joint ventures, but warned they had a large exposure to potential capital costs on the projects.
Beach managing director Reg Nelson said the company’s capital expenditure program was fully funded for the remainder of the financial year.
“Our low-cost production in the western flank supports ongoing free operating cash generation in a volatile oil price environment,” he said.
Development expenditure was revised down to $320-$345 million and $110-$125 million was expected to be spent on exploration.
The initial reductions relate to the Santos joint venture projects and the deferral of other drilling and infrastructure projects.
Beach noted a 24% decrease in the average realised oil price from $114 in the September quarter to $87 in the most recent as indicators of its difficult operating environment.
The company’s production guidance was upgraded to a level slightly higher that previously projected, moving from 8.6-9.4 million barrels of oil equivalent (mmboe) to 8.9-9.4 mmboe.
Sales volumes remained steady relative to the September quarter, with additional shipments of LPG and condensate offsetting lower sales.
Record sales volumes for the half year, at 5.73 million barrels of oil equivalent, was owing to sustained production from the Bauer field, strong gas demand, and limited downtime at the Moomba processing facility.
It said its hedging policy – where it secures floors on 80% of production and corporate costs “while retaining upside potential” – had provided it with a degree of protection to the oil price decline.
Beach reported cash reserves of $249 million and a $300 million undrawn secured loan facility at 2014’s end.