10-Mar-2020: I bought BPT shares this morning.
Good S&P/ASX100 Energy company, with good management.
Good exposure to Australian east-coast gas demand. They currently supply around 15% of the Australian east coast natural gas demand, and (very importantly) almost all of their gas is sold under fixed-price supply contracts.
They said last month that they have minimal spot gas price exposure: More than 99% of East Coast gas sales in H1 FY20 was sold under contract, with 98% expected to be sold under contract in H2 FY20.
That's critally important. It means that Beach know exactly what they'll be earning from their gas as long as those contracts remain in force, regardless of what the oil prices does. These are multi-year contracts.
They are also currently Australia's LARGEST onshore oil producer.
Possible M&A activity in the sector may well benefit BPT, as either a target or even as the acquirer of a smaller player such as COE or SXY (I hold both of those companies also).
Very solid balance sheet. Have only had net debt once in the past 10 years. As at 31-Dec-19, had $60m net cash. No net debt.
The following points are from their FY2020 H1 results released last month:
Growth program execution progressing well:
- 105 wells drilled in H1 FY20 at 83% success rate
- Western Flank operated oil production above 22,000 bopd
- Victorian Otway drilling program underway with Black Watch-1
- Ocean Onyx rig expected to arrive in March for offshore drilling program
Exploration/appraisal success:
- Bauer appraisal confirms further field extension
- Cooper Basin exploration/appraisal success rate of 66%
- Beharra Springs Deep-1 gas discovery in Perth Basin, flow tested at 46 MMscfd1
- Dombey-1 gas discovery in SA Otway
- Easternwell 106 rig contracted to appraise SA Otway, Perth Basin discoveries
Operational excellence program delivering results:
- Facility reliability averaged 98% across operated asset base in H1 FY20
- Kupe shutdown completed safely, on time and on budget
- H1 FY20 production 13.0 MMboe, oil production on track
Financial strength:
- Underlying EBITDA $622 million
- Underlying NPAT $274 million, +9% versus Pro Forma H1 FY19 Underlying NPAT
- Strong balance sheet position with $60 million net cash at 31 December 2019
- Interim dividend 1.0 cps (you wouldn't buy them as an income stock)
Full year FY20 guidance updated:
- Production guidance has been updated to 27 – 28 MMboe (prior 27 - 29 MMboe)
- Capital expenditure guidance has been updated to $875 – 950 million (prior $750 – 850 million)
- Underlying EBITDA guidance has been updated to $1.275 – 1.35 billion (prior $1.25 – 1.4 billion)
BPT were trading at over $2.60/share in September and again in January, and they closed yesterday at $1.33, so they're down over 50% from their recent highs (peaked at $2.87 on 20-Jan-2020). They are not worth half as much in March than they were in January. They have been oversold.
The shock moves by Russia and Saudi Arabia (to lower prices and increase supply, presumably to crush the US shale oil industry) will certainly impact the oil price, which gas prices are tethered to, and the demand for both oil and gas will be lower this year due to the impact of COVID-19, but longer term I believe this will be a good price-point to pick up some good quality energy companies, especially those with significant natural gas businesses such as BPT and Woodside (WPL).
