FY22 First Quarter Activities Report

Source: www.gulfoilandgas.com 10/20/2021, Location: Not categorized

Q1 FY22 production of 5.7 MMboe down 4% on the prior quarter
• Production primarily lower due to natural Western Flank oil decline (in-line with expectation), partially offset by increased nominations at Otway and Cooper Basin JV
• Q1 sales revenue of $388 million, down 8% due to lower sales, partially offset by higher liquids prices Active quarter driven by positive developments across diverse portfolio of gas assets
• Completed drilling Geographe 5 development well, intersecting reservoir in-line with pre-drill expectations
• Two discoveries (Rosebay and Lowry South) from three exploration wells in Western Flank gas acreage
• 100% success rate from 16 oil and gas development wells in Cooper Basin Joint Venture acreage
• Kupe inlet compression project delivered first gas at 77 TJ per day in mid-October Signed HOA with bp for LNG supply from Waitsia Stage 2, plant site construction commenced
• HOA signed with bp for Beach’s 3.75 million tonnes of LNG from Waitsia Stage 2 from H2 2023
• LNG pricing linked to Brent/JKM – with downside protection, full upside exposure and start-up flexibility
• Clough commenced earthworks and construction activity for Waitsia Stage 2 gas plant Healthy balance sheet maintained, returned to net cash position during the quarter
• Debt facility refinanced and upsized with new $600 million revolving debt facility
• Liquidity increased to $643 million, with net cash of $43 million at 30 September 2021
Announced aspiration to reach net zero emissions by 2050. Progressed Moomba CCS FEED activities
• Federal Government released CCS methodology for the Emissions Reduction Fund
• Beach (and Santos) have submitted the application to register the Moomba CCS project with the Clean Energy Regulator to enable ACCUs generation

Hosted 2021 Investor Day, highlighting fully funded production growth target of 28 MMboe by FY24 Snapshot
Historic LNG deal and first gas from Kupe compression highlight an active quarter for Beach

Beach Energy has released its First Quarter Activities Report for FY22. Key highlights during the quarter included the LNG HOA with bp and first gas from the Kupe inlet compression project.

Quarterly production of 5.7 MMboe was down 4% on the prior period due to natural field decline across the Western Flank oil and BassGas assets and planned and unplanned downtime within the Perth and Taranaki Basins. This was partially offset by increased customer nominations across Otway Basin and Cooper Basin Joint Venture assets.

Quarterly revenue fell 8% to $388 million, due to lower production volumes and a reduction in Cooper Basin liquids liftings, which impacted sales volumes during the quarter. This was partially offset by higher realised liquids pricing, which was supported by improving global product demand.

In a quarter in which the Company outlined a base case production target of 28 MMboe in FY24, Beach also progressed its Offshore Otway drilling campaign and successfully completed the drilling of the Geographe 5 development well which intersected volumes in line with pre-drill expectations.

Beach’s Managing Director Matt Kay said that the Company continues to make progress on its objective to fill its gas plants by FY24 and maintain production plateau into the future.

“While production is slightly down for the quarter, we are in a phase where our focus is on executing our major growth gas projects,” Mr Kay said.

“The Offshore Otway development drilling campaign now moves to the Thylacine targets, following successful results at Geographe 4 and 5.

“This is Beach’s largest ever drilling campaign and will be an important source of gas for the East Coast market.

“A major milestone of the quarter was signing a HOA with bp for the sale of 3.75 MT of LNG from the Waitsia Stage 2 Gas Project – heralding our arrival into global LNG markets for the first time in our 60-year history.

“We also achieved first gas from the Kupe compression project, which means that asset, which is critical for New Zealand’s energy needs, will be able to maintain production at up to 77 TJ per day.

“It is also exciting to commence an exploration campaign in the Western Flank, where we’ve already had two successful gas finds in this quarter – with an oil exploration campaign set for later in the year.”

“This is to be followed by an uplift in production from first gas from the Geographe wells and the Cooper Basin development drilling in the second half of FY22.”

Mr Kay said that Beach continues to progress its emissions reductions ambitions, with the Company recently announcing a net zero aspiration for 2050.

“We continue to progress the Moomba Carbon Capture and Storage project, having completed the FEED phase,” Mr Kay said.

At Beach’s Investor Day Update in September, the Company announced a base case production target of 28 MMboe in FY24.

Importantly, the base case does not assume any success from Western Flank exploration, demonstrating Beach’s highly robust business fundamentals.

Financial

Sales volume
Quarterly sales volumes decreased 11% on the prior quarter to 5,762 kboe due to reduced liquids liftings from the Cooper Basin, and reduced production from all products.

Gas sales and ethane volumes fell 2% on the prior quarter due to natural field declines at BassGas and commissioning activities at Kupe. This was partially offset by higher customer nominations through Otway and Cooper Basin JV.

Oil sales volumes fell 25% on the prior quarter, primarily due to a lower contribution from Western Flank oil production and timing of liquids liftings from Port Bonython. Quarter-on-quarter Western Flank oil production decline rate is currently trending towards the lower end of the previously disclosed annualized decline rate of 35 – 45% in FY22 (i.e. higher production rates). Western Flank production was also impacted by delays to undertaking workovers at certain fields due to COVID-19 restrictions.

Sales revenue
Quarterly sales revenue of $388 million was 8% lower than the prior quarter due to lower sales volumes across all products. This was primarily impacted by reduced Western Flank oil production and reduced liquids liftings from Port Bonython. Gas revenue was down 4% on the prior quarter, with the prior quarter benefitting from the true-up payment relating to the Otway price review.

This was partially offset by higher oil, condensate and LPG prices, which continue to be supported by increasing demand as global economy activity recovers from COVID-19 shutdowns Average realized price.

The average realized price across all products was $67.3 per boe, up 3% on the prior quarter.

The realized oil price increased 11% to $110.3 per bbl, supported by a recovery in global oil prices during the first quarter as global demand continues to recover following COVID-19 shutdowns.

The realized gas price decreased 2% to $7.5 per GJ on the prior period, however, increased 5% on the prior corresponding period. The lower realised price was due to the prior quarter benefitting from the true-up relating to the re-pricing of certain Otway Gas Project volumes following the Origin GSA price review.

Capital expenditure
First quarter FY22 capital expenditure was $195 million, up 13% on the prior quarter. Development, plant and equipment spend increased 14% as the offshore Otway drilling activities continued and increased drilling activity within the Cooper Basin JV and Western Flank.

Liquidity
During the quarter, Beach successfully refinanced and upsized the Company’s $450 million debt facility to $600 million. This was achieved with favourable terms and margins and increasing the weighted average term to maturity of approximately 4.2 years.

At 30 September 2021, Beach had liquidity of $643 million, comprising $193 million of cash reserves and $450 million in undrawn facilities. The Company has drawn down $150 million under the new $600 million committed revolving credit facility.

Beach ended the quarter with net cash of $43 million, an increase of $91 million on the prior quarter. This was supported by $42 million one-off cash payment relating to a favourable arbitral outcome in respect to a contractual dispute relating to the carbon liability associated with a Kupe GSA and cash settlement inflow following completion of the acquisition of Mitsui’s Bass Basin interests.

Perth Basin

Production
Perth Basin production was 276 kboe, down 20% on the prior quarter. Beharra Springs production was impacted by planned maintenance (as previously reported), unplanned production downtime and maintenance due to CO2 membrane issues. The facility is expected to return to full capacity of 20 TJ per day by December 2021.

Construction underway for Waitsia Stage 2 During the quarter, the Waitsia EPC contractor, Clough, commenced bulk earthworks on the site of the planned Waitsia Stage 2 gas facility. Offsite structural steel fabrication has commenced in parallel, using local Western Australian suppliers.

Waitsia LNG HOA signed with bp Beach announced the signing of a Heads of Agreement (“HOA”) with bp for all of Beach’s 3.75 million tonne share of LNG from the Waitsia Gas Project Stage 2 project.

The HOA contains all material terms and conditions for bp to purchase Beach’s expected LNG volumes and includes flexibility around the commencement of firm supply to ensure alignment with completion of construction and commissioning activities.

Beach and bp are targeting a fully termed LNG Supply and Purchase Agreement in H2 FY22. Supply will be delivered on a Free on Board (“FOB”) basis from the North West Shelf (“NWS”) facilities in Karratha, Western Australia, leveraging bp’s leading LNG trading and shipping capability, who is an existing participant in the NWS Joint Venture.

The agreed LNG pricing is linked to both Brent and Japan Korea Market (“JKM”) price indices with full upside to each, while downside is protected through a price protection mechanism.

Supply is forecast to commence in H2 calendar year 2023.

Further activities
Beach and its joint venture participant Mitsui are finalising plans for a drilling campaign commencing in H2 FY22, which will include the five committed Waitsia development wells as well as three to six additional wells.

This may include several development wells in the Beharra Springs Deep reservoir, which could lead to plant de-bottlenecking and/or expansion opportunities.

Additional exploration and appraisal wells are also being considered to create a further step-change in the Perth Basin for Beach.

Victorian Otway Basin

Production
Victorian Otway Basin production was 875 kboe, up 9% on the prior period, due to higher customer nominations. Offshore drilling campaign Drilling recommenced at the Geographe 5 development well in late-August 2021 following issues with the mooring lines. The well was drilled to target depth and intersected reservoir in line with pre-drill expectations. The well encountered 1,660 metres of net gas pay in an overall horizontal section of 2,143 metres Measured Depth in the Thylacine member. The well has been flow tested at rates up to 62 MMscfd, limited by the test separator equipment, in line with expectations. Geographe 4 will be tested in November 2021 with production expected to commence in mid-FY22.

The rig will be moved to the Thylacine North 1 well location following the flow testing of the Geographe 4 and 5 wells during Q2 FY22.

Enterprise Phase 2
During the quarter, Beach completed Concept Select for Enterprise Phase 2 and is progressing Front-End Engineering Design (FEED) activities towards a Final Investment Decision in H2 FY22.

Western Flank Oil & Gas

Production
Total Western Flank oil and gas production was 1.6 MMboe, down 10% on the prior quarter, with higher gas and associated liquids production offset by lower oil volumes.

Western Flank oil production was 1.0 MMboe, down 18% on the prior quarter due to natural field decline, with no new wells tied-in during the quarter, and COVID-19 related border restrictions impacting timing of workovers on certain wells.

The field production decline rate is currently trending towards the lower end of the previously disclosed annualised decline rate of 35 – 45% in FY22 (i.e. higher production rates).

Development activity during the second quarter of FY22 is expected to further reduce declines during the second half of the financial year.

Western Flank gas and gas liquids production was 574 kboe, up 12% following planned maintenance work at the Middleton gas processing facility during the prior quarter. Middleton is forecast to be offline during October 2021 to allow for CBJV maintenance activities.

FY22 drilling activities
Beach commenced the FY22 drilling program with the Kangaroo 2 appraisal well drilled in ex PEL 91 to appraise the Birkhead reservoir of the Kangaroo field. The well intersected the oil-bearing Birkhead reservoir and was completed as a future water injector to support oil recovery from the field.

The FY22 gas exploration drilling program commenced in ex PEL 106 in late August 2021. Three wells were drilled by the end of the first quarter, yielding two discoveries at Rosebay 1 and Lowry South 1. Both discoveries will be completed as producers and tied-in to the Middleton gas processing facility in mid-FY22. The final well in the gas exploration campaign, Lowry Southwest 1, was drilling ahead at the end of the quarter.

The impact on plateau extension through the Middleton plant and potential for reserves addition will not be known until the wells have been online for at least six months.

Following completion of the gas exploration program, the rig will move to ex PEL 104 to undertake a two well horizontal development program within the Birkhead reservoir of the Growler and Spitfire fields. Production from these two wells is expected to commence in H2 FY22.

The rig will then move to ex PEL 91 and drill a total of three horizontal development wells in the McKinlay reservoir of the Balgowan and Kalladeina fields before moving to drill at least two appraisal/development wells in the ex PEL 104 Martlet field. The rig is then anticipated to move to drill up to 15 oil exploration wells in various licences throughout the Western Flank.

Production
Total Cooper Basin JV production was 1.9 MMboe, 1% lower than the previous quarter. Sales gas production increased 2% following successful remediation of compressor outages at satellite fields and the connection of recently drilled development wells in the FY22 campaign.

Oil production decreased 10% due to natural field decline.

Drilling
In the non-operated Cooper Basin JV, Beach participated in 22 wells, with three wells drilling ahead at the end of the quarter, at an overall success rate of 95% (wells cased and suspended of completed as a future producer).

The FY22 drilling program is off to a positive start, with highlights including:
• 12 gas development wells were drilled at a 100% success rate with positive results from the Coolah field, which is expected to support near-term gas production.
• Four oil development wells within the McKinlay field drilled at a 100% success rate. The fifth McKinlay development well was successfully completed subsequent to the end of the quarter. All five wells areexpected to be brought online during Q2 FY22 with potential uplift to oil production.

Moomba Carbon Capture and Storage project
FEED for the Moomba Capture and Storage (CCS) project has been completed. The project will leverage existing infrastructure and depleted fields within the Cooper Basin to sequester up to 1.7 million tonnes of CO2 per annum (gross).

During the quarter, the Federal Government released its methodology for CCS projects to generate Australian Carbon Credit Units (ACCUs) through the Emissions Reduction Fund. Beach and the operator, Santos, have submitted the application to register the Moomba CCS Project with the Clean Energy Regulator which will entitle Beach to generate ACCUs in relation to its sequestered CO2.

New Zealand

Production
Kupe production was 623 kboe, down 3% on the prior quarter, partially attributable to commissioning activities for the Kupe inlet compression project.

Kupe compression project Commissioning of the Kupe compression project was completed in late September, with first gas introduced into the plant two weeks ahead of schedule.

Plant throughput has since returned to full capacity, with the newly installed compressor expected to support plateau production rates from the Kupe field until mid-FY24.

Plans to extend plateau production Beach and its joint venture participants continue to assess opportunities to maintain plateau production rates.

In particular, Beach is assessing a potential development well (Kupe East) which could be drilled from the existing Kupe platform. The well would drain the incremental 2P reserves within the eastern culmination of the field.

The well is currently being considered for drilling in FY23, subject to approvals and rig availability

Victorian Bass Basin

Production
Production from BassGas was 379 kboe, down 5% on the prior quarter, due to natural field decline.

Beach has commenced planning for the Yolla wireline program, which aims to improve the production performance of three producing wells within the Yolla field. The program is expected to commence in November and, if successful, could deliver upside to FY22 production.

The 28-day statutory shutdown of the Lang Lang gas facility has been deferred until H2 FY22 due to COVID-19 restrictions in Victoria.

Progressing Trefoil FEED activities Beach is progressing the Trefoil development opportunity which would include two subsea development wells and a 37-kilometre tie-back to Beach’s existing offshore Yolla platform.

The project would support the extension of the Yolla field and deferral of abandonment activities. Beach is targeting Final Investment Decision in H1 FY23, with potential for first gas in H2 FY25, subject to necessary internal and external approvals.

Prion 3D seismic
Beach continued preparations for the acquisition of the Prion 3D seismic across the Trefoil, White Ibis and Bass discoveries during mid-FY22, with an expected start date in November 2021. The new seismic data will improve imaging of the Trefoil field and allow for a more informed FID for the proposed Trefoil development. It will also provide additional improved data to quantify the potential of the White Ibis and Bass discoveries, with potential to be tied back to the proposed Trefoil infrastructure.

South Australian Otway

Production
Production from the SA Otway was 34 kboe, down 34% on the prior quarter due to natural field decline and unplanned downtime.

The plant is expected to be shut-in during FY22 as volumes decline below the minimum turndown rate with the plant to be kept available for production in the event of future exploration success.

Exploration activities
Beach plans to acquire 3D seismic over the Dombey field between November 2021 and January 2022. This newly acquired seismic aims to assess further opportunities to re-commence operations at the plant in future years.


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