Beach Energy : Quarterly report for period ended 31 December 2015

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Quarterly Report

for the period ended 31 December 2015

HIGHLIGHTS

FINANCIAL

• Sales volumes of 2.5 MMboe, down 3% on prior quarter, mainly due to seasonally lower gas demand

• Total sales revenue of $126 million, down 13% on prior quarter, mainly due to lower realised oil prices

• Capital expenditure of $78 million, with c.$20 million of reductions achieved in H1 FY16

• Cash reserves of $164 million, down $10 million from prior quarter and held broadly constant over past six months

• Strengthened financial capacity with new $530 million (+$210 million) senior secured syndicated debt facility; drawn to $150 million, plus $20 million letters of credit

  OPERATIONS

• Quarterly production of 2.3 MMboe, broadly in-line with prior quarter as better than expected performance from the Bauer Field, new facilities at Stunsail and Pennington, and strong performance from both operated and non-operated gas fields offset natural field decline

• Successful completion of the Windorah Trough near-field gas exploration program, with five new field discoveries from five wells

• Increased production from ex PEL 92, partly due to installation of artificial lift with variable speed drive technology at Callawonga-7

• Continual focus on safety, with over 15 months of LTI-free operations

• 20 wells completed with a success rate of 95%

  CORPORATE

• Announcement of recommended merger of Beach and Drillsearch; merger

  approved by Drillsearch shareholders subsequent to quarter-end

  SUBSEQUENT EVENTS

• Appointment of Mr Matthew Kay as Chief Executive Officer, effective 17 July 2016 or

  such earlier date as is available and mutually agreed

• Reduced FY16 capital expenditure guidance of $180 - $210 million (previously $240

  - $270 million)

• Narrowed production guidance of 8.0 - 8.6 MMboe (previously 7.8 - 8.6 MMboe)

• Anticipated H1 FY16 impairment charges in the range of $450 - $650 million (pre-tax)

• Withdrawal from ATP 732 farm-in agreement

December Q2 FY15	September Q1 FY16	December Q2 FY16	Qtr on Qtr Change	YTD
Production (kboe)	2,386.5	2,276.5	2,254.4	(1%)	4,530.9
Sales Volumes (kboe)	2,857.4	2,589.3	2,518.7	(3%)	5,108.0
Sales Revenue ($ million)	194.0	145.2	126.4	(13%)	271.6
Oil Price ($/bbl)	86.8	67.6	56.1	(17%)	61.9
Cash ($ million)	248.6	174.1	164.0	(6%)	164.0

KEY STATISTICS

Beach Energy Limited ABN: 20 007 617 969 ASX: BPT

25 Conyngham Street

Glenside SA 5065

GPO Box 175

Adelaide SA 5001

T [phone]

W www.beachenergy.com.au E [e-mail]

Investor enquiries

Derek Piper

T [phone]

Media enquiries

Sylvia Rapo

T [phone]

DIRECTORS

Independent Non-executive Chairman

Glenn Davis

Independent Non-executive Directors

Colin Beckett Fiona Bennett John Butler Robert Cole Belinda Robinson Doug Schwebel

Neil Gibbins

Acting Chief Executive Officer

28 January 2016 Ref: #005/16

FINANCIAL

SALES

Sales volumes decreased 3% to 2,519 kboe, mainly due to lower gas demand following peak winter months and reduced third party sales. Variations in LPG and condensate sales were impacted by timing of shipments and additional liftings, respectively.

Sales		December Q2 FY15	September Q1 FY16	December Q2 FY16	Qtr on Qtr Change	YTD
Oil (kbbl)	Cooper and Eromanga Basins - Own Production	1,212.8	1,097.7	1,088.9	(1%)	2,186.6
	Cooper and Eromanga Basins - Third Party	312.2	373.3	351.4	(6%)	724.7
	Total Cooper Oil	1,525.0	1,471.0	1,440.3	(2%)	2,911.3
	Egypt	27.0	47.3	39.9	(16%)	87.2
	Total Oil	1,552.0	1,518.3	1,480.2	(3%)	2,998.5
Gas and Ethane (PJ)	Cooper Basin - Own Product	5.1	5.1	4.8	(6%)	9.9
	Cooper Basin - Third Party	0.9	0.1	0.1	(6%)	0.2
	Egypt	-	0.1	0.1	33%	0.2
	Total Gas and Ethane	6.0	5.3	5.0	(6%)	10.3
LPG (kt)	Cooper Basin - Own Product	17.4	13.0	10.4	(20%)	23.4
	Cooper Basin - Third Party	0.3	0.3	0.2	(19%)	0.5
	Total LPG	17.7	13.3	10.6	(20%)	23.9
Condensate (kbbl)	Cooper Basin - Own Product	137.4	46.4	89.1	92%	135.5
	Cooper Basin - Third Party	2.1	1.9	1.9	4%	3.8
	Total Condensate	139.5	48.3	91.0	89%	139.3
Total Oil and Gas Sales (kboe)		2,857.4	2,589.3	2,518.7	(3%)	5,108.0
Total - Own Product (kboe)		2,390.3	2,192.1	2,145.0	(2%)	4,337.1
Total - Third Party (kboe)		467.1	397.2	373.7	(6%)	770.9

REVENUE

Total sales revenue decreased 13% to $126 million, mainly due to lower realised oil prices. The average realised

Australian dollar oil price decreased to $56/bbl (from $68/bbl), representing a 17% decline from the prior quarter.

Sales Revenue ($ million)	December Q2 FY15	September Q1 FY16	December Q2 FY16	Qtr on Qtr Change	YTD
Oil	134.8	102.7	83.0	(19%)	185.7
Sales Gas and Ethane	34.6	31.9	30.5	(4%)	62.4
LPG	13.1	7.4	6.8	(8%)	14.2
Condensate	11.4	3.2	6.1	84%	9.3
Sales Gas and Gas Liquids	59.2	42.5	43.4	2%	85.9
Total Oil and Gas	194.0	145.2	126.4	(13%)	271.6
Total - Own Product	160.2	118.1	104.5	(12%)	222.6
Total - Third Party	33.8	27.1	21.9	(19%)	49.0
Average Realised Prices	December Q2 FY15	September Q1 FY16	December Q2 FY16	Qtr on Qtr Change	YTD
All Products ($/boe)	67.9	56.1	50.1	(11%)	53.2
Oil ($/bbl)	86.8	67.6	56.1	(17%)	61.9
Sales Gas and Ethane ($/GJ)	5.8	6.0	6.1	1%	6.0
LPG ($/t)	740.3	558.5	638.7	14%	594.2
Condensate ($/bbl)	81.9	67.7	66.2	(2%)	66.7

CAPITAL EXPENDITURE

Second quarter capital expenditure of $78 million represented a 76% increase from the prior quarter and a 48% reduction relative to the prior corresponding period. Higher expenditure predominantly related to the SACB and SWQ JVs and recommencement of Beach's operated drilling program.

In order to maintain financial strength, Beach continues to review and adjust its capital expenditure program in response to declining oil prices. Within the constraints of existing contracts and committed expenditure, Beach has identified savings and reduced its FY16 capital expenditure guidance to $180 - $210 million (previously $240 - $270 million). The reduced range reflects savings achieved in H1 FY16 of approximately $20 million and further reductions and deferrals identified for H2 FY16 of up to $40 million. Subject to joint venture approval, the identified savings are expected through:

• A curtailed operated drilling program, with a reduction of up to 10 wells in H2 FY16;

• Well inventory management, with completions and connections deferred where appropriate;

• Deferral of the Bauer facility upgrade and non-critical projects; and

• A reduced capital program within the SACB and SWQ JVs.

  
  

  Further details are included in the announcement of 22 January 2016.

  
  

  Capital Expenditure ($ million)	December Q2 FY15	September Q1 FY16	December Q2 FY16	Qtr on Qtr Change	YTD
  Exploration and Appraisal	55.5	8.2	20.1	147%	28.3
  Development, Plant and Equipment	93.7	35.9	57.4	60%	93.3
  Total	149.2	44.1	77.5	76%	121.6

  
  

  LIQUIDITY

  Cash reserves were $164 million at quarter-end, representing a $10 million decrease from the prior period and a $6 million decrease during the first six months of FY16. Despite an approximate 35% reduction in the average realised oil price over this period, Beach's disciplined approach to controlling capital and operational costs has helped preserve its cash position. Such measures include expected full year FY16 operational cost savings of approximately 15% across Beach's Western Flank oil and gas assets. Corporate cost savings are also being achieved, including an approximate 7% reduction in headcount during H1 FY16.

  Beach strengthened its access to liquidity by entering into a $530 million (+$210 million) senior secured syndicated corporate debt facility, which replaced existing lending arrangements. The new facility was drawn to $170 million to refinance outstanding borrowings ($150 million) and letters of credit ($20 million), with remaining headroom available for capital expenditure programs, working capital requirements and potential growth opportunities. The new facility consists of five tranches:

• A three-year revolving facility of $200 million;

• A five-year revolving facility of $200 million;

• A three-year revolving acquisition facility of $100 million; and

• Two $15 million letter of credit facilities (non-syndicated).

The new facility was provided by Beach's existing lenders, with improved pricing and terms in recognition of existing Balance Sheet strength and Beach's resilient business model. Further details are included in the announcement of 7 December 2015.

CAPITAL STRUCTURE

Capital Structure	September Q1 FY16	December Q2 FY16	Qtr on Qtr Change
Fully Paid Ordinary Shares	1,302,877,977	1,302,877,977	-
Unlisted Employee Rights	3,493,755	5,019,025	44%

HEDGING

Beach's policy is to hedge up to 80% of oil production and corporate costs by securing floors to protect against downside oil price scenarios, while retaining upside potential. This approach is ongoing, with the following hedges in place as at 31 December 2015.

Period	Floor $45 per bbl (Brent)	Total Hedged Volumes (bbl)
FY16 (remaining)	1,132,500	1,132,500
FY17	1,327,500	1,327,500
Total	2,460,000	2,460,000