Quarterly Report for the period ended 31 December 2016 Page 1 Page 1
Beach Energy Limited ABN: 20 007 617 969 ASX: BPT 25 Conyngham Street, Glenside SA 5065 GPO Box 175, Adelaide SA 5001
www.beachenergy.com.au [email protected] Investor enquiries: Derek Piper +61 8 8338 2833
Media enquiries: Sylvia Rapo +61 8 8338 2833
31 January 2017 Ref: #003/17
Quarterly Reportfor the period ended 31 December 2016
KEY HIGHLIGHTS• Cashreservesincreasedby$55million,benefitingfromcostsavinginitiativesandleveragetohigherrealised
oil prices; available liquidity increased to approximately $650 million.
• Record half year sales volumes of 6.4 MMboe, up 11% from the prior period and 25% from H1 FY16.
• Recordhalfyearproductionof5.5MMboe,up8%fromthepriorperiodand22%fromH1FY16.
• Quarterly sales revenue of $176 million, up 4% primarily due to higher realised oil prices.
• Quarterlysalesandproductionvolumesdown7%and9%respectively,withsuccessfuldevelopmentactivitiespartiallymitigatingtheimpactofnaturalfielddecline.
• WesternFlankoperatedfieldcostsbelow$3.00/boe,downmorethan20%year-to-date.
• SACBJVdeliveringoperatingcostsavingsandontracktobeatourfullyearcostreductionguidanceof15%.
• Capital expenditure up 38% to $42 million due to increased Western Flank exploration, appraisal anddevelopmentactivity.
• Oil discoveries at Osmanli-1 and September-1 in ex PEL 91, representing Birkhead and Poolowanna oilexplorationsuccess.
• 15wellsdrilledwithan80%successrate;24wellsdrilledduringH1FY17withan88%successrate.
• ReducedFY17capitalexpenditureguidanceof$170-185million(previously$180-200million);expandeddrillingprogramtobedeliveredataloweroverallcost.
• IncreasedFY17productionguidanceof10.3-10.7MMboe(previously9.7-10.3MMboe).
COMMENTS FROM CHIEF EXECUTIVE OFFICER, MATT KAY“Netquarterlyoperatingcashflowof$87millionandanincreaseincashreservesof$55millionclearlydemonstrateBeach’s lowcostoperatingmodeland leverage tohigheroilprices. Our strict focusoncosts continues todeliverresults, includinga year-to-date reduction inWesternFlankoperatedfield costsofmore than20%. Ourfinancialpositionhasstrengthenedandwenowhaveavailableliquidityofapproximately$650million.
“Inthefieldwearedeliveringourcapitalprogramontimeandunderbudget.Our80%drillingsuccessrateincludestheOsmanli-1Birkheadoildiscovery,whichprovidedencouragementfortheBirkheadplaywithinourWesternFlankacreage.Inaddition,productionfacilitiesfortheKangaroo-1Birkheadoildiscoveryhavebeeninstalledandthewellisnowonextendedproductiontest.ForthefirsthalfofFY17,Beachhasachievedrecordproductionof5.5MMboe,withsuccessfulfielddevelopmentactivitieshelpingtomitigatetheimpactofnaturalproductiondecline.
“OurrevisedFY17capitalexpenditureandproductionguidanceannouncedtodayreinforcesprogressmadethisyear.Duetorecordhalf-yearproduction,successinthefieldandcostefficiencies,wehavemateriallyincreasedourdrillingactivityforFY17.Wenowplantodrill16operatedwells(+3)andupto42non-operatedwells(+5).Thankstocostsavingsandefficiencygains,weexpecttodelivertheexpandedprogramataloweroverallcostof$170–185million(previously$180–200million).
“Resultsinthefieldhavealsoallowedustoincreaseproductionestimates,withguidancenowintherangeof10.3–10.7MMboe(previously9.7–10.3MMboe).Theseguidancerevisionsreflectpositiveoutcomesachievedinthefirsthalf,includingexplorationsuccessandincreasedinvestmentinourcoreWesternFlankacreage.”
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FINANCIALSALES VOLUMESRecordhalfyearsalesvolumesof6.4MMboewereachieved,representinganincreaseof11%fromthepriorperiodand25%fromH1FY16.Quarterlysalesvolumesof3,073kboewere7%lowerthanthepriorquarter,duemainlytolowerproductionvolumesandonelessoilshipment.
Sales VolumesDecember Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change YTD
Oil (kbbl)
CooperandEromangaBasins –OwnProduct
1,089 1,637 1,405 (14%) 3,042
CooperandEromangaBasins –ThirdParty
351 147 143 (3%) 290
Total Cooper Basin Oil 1,440 1,784 1,548 (13%) 3,332
Egypt 40 – – – –
Total Oil 1,480 1,784 1,548 (13%) 3,332
Sales Gas (PJ)
CooperBasin–OwnProduct 4.8 7.3 7.0 (4%) 14.3
CooperBasin–ThirdParty 0.1 0.1 0.2 94% 0.3
Egypt 0.1 – – – –
Total Gas 5.0 7.4 7.2 (3%) 14.6
LPG (kt)
CooperBasin–OwnProduct 10.4 10.7 13.8 29% 24.5
CooperBasin–ThirdParty 0.2 0.4 – (100%) 0.4
Total LPG 10.6 11.1 13.8 24% 24.9
Condensate (kbbl)
CooperBasin–OwnProduct 89 142 176 24% 318
CooperBasin–ThirdParty 2 4 2 (45%) 6
Total Condensate 91 146 178 22% 324
Total Oil and Gas Sales (kboe) 2,519 3,290 3,073 (7%) 6,363
Total–OwnProduct(kboe) 2,145 3,116 2,890 (7%) 6,006
Total–ThirdParty(kboe) 374 174 183 5% 357
Key StatisticsDecember Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change YTD
Production(kboe) 2,253 2,902 2,628 (9%) 5,530
SalesVolumes(kboe) 2,519 3,290 3,073 (7%) 6,363
SalesRevenue($million) 126 169 176 4% 344
OilPrice($/bbl) 56.1 62.6 73.2 17% 67.5
Cash($million) 164 243 298 22% 298
Drawndebt($million) 150 150 150 – 150
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REVENUETotalsalesrevenueof$176millionwas4%higherthanthepriorquarter,mainlyduetohigherrealisedoilandliquidsprices.TheaveragerealisedAustraliandollaroilpriceincreasedby17%to$73/bbl(from$63/bbl),andtheaveragerealisedsalesgaspriceremainedunchangedat$5.92/GJ.
Sales Revenue ($ million)
December Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change YTD
Oil 83.0 111.6 113.3 2% 224.9
SalesGas 30.5 43.9 42.8 (2%) 86.7
LPG 6.8 5.0 7.4 48% 12.4
Condensate 6.1 8.4 12.0 42% 20.4
Sales Gas and Gas Liquids 43.4 57.3 62.2 9% 119.5
Total Oil and Gas 126.4 168.9 175.5 4% 344.4
Total–OwnProduct 104.5 158.9 164.7 4% 323.6
Total–ThirdParty 21.9 10.0 10.8 8% 20.8
Average Realised PricesDecember Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change YTD
All Products ($/boe) 50.1 51.3 57.1 11% 54.1
Oil($/bbl) 56.1 62.6 73.2 17% 67.5
SalesGas($/GJ) 6.1 5.9 5.9 0% 5.9
LPG($/t) 638.7 446.9 534.5 20% 495.4
Condensate($/bbl) 66.2 57.6 67.4 17% 63.0
CAPITAL EXPENDITURE Capitalexpenditureof$42millionwas38%higherthanthepriorquarter,duemainlytoincreasedexplorationandappraisal activity within Beach’sWestern Flank acreage, and increased activity associated with the Bauer facilityexpansionandMiddletoncompressionproject.Capitalexpendituretotalled$72millioninH1FY17,representinga41%reductionfromH1FY16.
Capital Expenditure ($ million)
December Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change YTD
ExplorationandAppraisal 20.1 6.5 16.2 151% 22.7
Development, Plant and Equipment
57.4 23.9 25.7 8% 49.6
Total 77.5 30.4 41.9 38% 72.3For
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Subsequent to quarter-end, Beach announced reduced FY17 capital expenditure guidance of $170 – 185million(previously$180–200million).Duetorecordhalfyearproduction,successinthefieldandcostefficiencies,BeachhasmateriallyincreaseditsdrillingactivityforFY17.Furthermore,Beachisconfidentthattheexpandedprogramcanbeundertakenatacostbeloworiginalguidance.AdditionaldiscretionaryprojectstobeundertakeninH2FY17include:
• Installationofproduction facilities inexPEL91 tobring theKangaroo-1oilwellonlineandprovidecapacity forfuture discoveries.
• Twofollow-upexplorationwellsinexPEL91tofurtherappraisetheBirkheadFormationoilplayneartheKangaroodiscovery.
– NineoperatedexplorationwellsplannedforFY17.
• Two development wells in the Pennington Field in ex PEL 91 to optimise field commerciality and accelerateproduction.
– Sevenoperatedappraisal/developmentwellsplannedforFY17.
• AdditionalSACBandSWQjointventurewellsproposedbytheoperatorduetoimproveddrillingefficiencieswhichhaveresultedinfasterdrillingtimes.
– Upto36wellsproposedforFY17.CertainwellsaresubjecttoBeachreviewandconfirmationofparticipation.
Further details are contained in the announcement of 31 January 2017.
LIQUIDITY
Cash reserves increasedby$55millionduring thequarter,which includednetoperatingcashflowof$87million,capitalexpenditureof$42millionandnetreceiptsfromassetsales.Atquarter-end,cashreserveswere$298million,withdrawndebtof$150millionandundrawndebtfacilitiesof$350million.
Beach’sstrengthening liquiditypositiondemonstratesthecompany’s leverageto improvingoilprices,andongoingeffortstoreducecostsandimproveoperatingefficiencies.Fieldoperatingcostsavingsofmorethan20%wereachievedin H1 FY17 in Beach’s operated Western Flank acreage, and the SACB and SWQ JVs are on track to beat our full year operatingcostreductionguidanceof15%.FurtherdetailoncostsavingswillaccompanytheFY17HalfYearReport,whichisdueforreleaseon20February2017.
Liquidity ($ million)
December Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change
Cash Reserves 164.0 243.5 298.2 22%
Drawndebt 150.0 150.0 150.0 –
Net Cash 14.0 93.5 148.2 59%
UndrawnFacilities 350.0 350.0 350.0 –
CAPITAL STRUCTURE
Capital StructureSeptember
Q1 FY17December Q2 FY17
Qtr on Qtr Change
Fully Paid Ordinary Shares 1,865,094,804 1,865,094,804 –
UnlistedEmployeeRights 4,774,239 6,907,656 45%
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HEDGINGBeachundertookareviewofitshedgingpolicyduringthequarterandconsequentlyreducedhedginglimitstoreflectthecompany’ssoundfinancialposition.Beachnowseekstohedgesufficientvolumestocoverupto70%ofitstotaloilproductioncostsand total corporatecosts (previously80%). A rangeof instruments isused toprotectagainstdownsideoilpricescenarios,andallhedging transactionssince June2016havebeenentered intousingzero-costinstruments.
Athree-waycollarwasenteredintoduringQ2FY17whichprovidesa$50-96/bblcollar,aswellasfullupsideparticipationifoilpricesexceed$106/bbl.Thefollowinghedgeswereinplaceasat31December2016.
Hedges (Brent)
Floor $45 per bbl
Collar $40-111 per bbl
Collar $40-102 per bbl
Three-way collar $50-96-106
per bbl
Total Hedged Volumes (bbl)
FY17 (remaining)
405,000 765,000 180,000 – 1,350,000
FY18 – 517,500 517,500 405,000 1,440,000
Total 405,000 1,282,500 697,500 405,000 2,790,000
OPERATIONSPRODUCTION
Increased production fromWestern Flank developmentwells brought online and artificial lift installations helpedmitigatetheimpactofnaturalfielddecline.Theseactivitiescontributedtorecordhalfyearproductionof5,530kboe,anincreaseof8%fromthepriorperiodand22%fromH1FY16.Halfyearproductionincludesrecordoperatedoilproductionof3,095kbbl.Quarterlyproductionof2,628kboewas9%lowerthanthepriorperiod.
Subsequenttoquarter-end,BeachannouncedincreasedFY17productionguidanceof10.3–10.7MMboe(previously9.7–10.3MMboe), following recordproduction inH1FY17andgreater investment in itsWesternFlankacreage.UpwardrevisionstoguidanceweremadeduetobetterthanexpectedoilandgasperformancefromoperatedWesternFlankacreage,newproductionfromtheKangaroo-1oildiscovery,andadditionaldevelopmentdrillingtobeundertakenin the Pennington Field. Further details are contained in the announcement of 31 January 2017.
ProductionDecember Q2 FY16
September Q1 FY17
December Q2 FY17
Qtr on Qtr Change YTD
Oil(kbbl)
Cooper Basin 1,096 1,631 1,464 (10%) 3,095
Egypt 41 – – – –
Total Oil 1,137 1,631 1,464 (10%) 3,095
SalesGasand Ethane(PJ)
Cooper Basin 5.4 6.0 5.5 (9%) 11.5
Egypt 0.1 – – – –
LPG(kt) Cooper Basin 10.8 14.6 12.6 (14%) 27.2
Condensate(kbbl) Cooper Basin 86 116 122 5% 238
Total Sales Gas and Gas Liquids 1,117 1,271 1,164 (8%) 2,435
Total Oil and Gas (kboe) 2,254 2,902 2,628 (9%) 5,530
NB. Preliminary data for ex PEL 106 and ex PEL 104 / 111
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Cooper Basin
Western Flank Oil – ex PEL 91 (Beach 100%)
NewproductionwasbroughtonlinefromtheHanson-4and Stunsail-3 developmentwells, with Stunsail-3 thepermit’s only current producer from the Birkhead Formation. Additional artificial lift installations werecompletedintheHansonandPenningtonfields,whichprovidedinitialincrementalproductionofapproximately400bopd.Theseactivitieshelpedmitigatenaturalfielddecline and were undertaken as part of a broaderdevelopment campaign which completed toward theendofthequarter.Quarterlyoilproductionof950kbbl(10,350bopd)was12%lowerthanthepriorperiod.
Work commenced on the Kangaroo productionfacility, with mechanical installation completedsubsequenttoquarter-end.TheKangaroo-1explorationwell commenced an extended production test in lateJanuary2017. TheBauerfacilityexpansioncontinued,although someweather relateddelays did necessitateminorre-buildofthesite. Mechanical installationandcommissioning of the expansion by the end of Q3 FY17 istargeted.Theexpansionwillincreasefluidshandlingcapacity by 60% from 75,000 bfpd to 120,000 bfpd.
Western Flank Oil – ex PEL 92 (Beach 75% and operator, Cooper Energy 25%)
New production was brought online from theCallawonga-12 development well, and installation ofartificialliftatCallawonga-1providedinitialincrementalproductionofapproximately400bopd.Theseactivitiesbroadlyoffsetnaturalfielddecline. Quarterlyaveragedaily oil production of 1,915 barrels (gross) wasapproximately4%lowerthanthepriorperiod,withtotalnetoilproductionof175kbbl.
Western Flank Oil – ex PEL 104 / 111 (Beach 40%, Senex 60% and operator)
Various production optimisation activities and wellworkoverscontinued,whichbroadlyoffsetnaturalfielddecline. Average daily oil production of 2,800 barrels(gross) was approximately 4% lower than the priorperiod,withtotalnetoilproductionof105kbbl.
Queensland Oil – Kenmore and Bodalla; ATP 299(Kenmore and Bodalla: Beach 100%; ATP 299: Beach 40%, Santos 60% and operator)
Beach completed the sale of its operated Queensland oil assets on 19 October 2016, consistent with itsstrategy tooptimise coreoperations. The transactiondelivered efficiencies in Cooper Basin operating costsand liability management. As a result of the sale, quarterly Queensland oil production of 42 kbbl (net)was38%lowerthanthepriorperiod.
Western Flank Gas and Gas Liquids – ex PEL 106; ex PEL 513 / 632(Ex PEL 106: Beach 100%; ex PEL 513 / 632: Beach 40%, Santos 60% and operator)
ExPEL106productionof200kboe(2,150boepd)was24% lower than the prior period, mainly due todowntimefromalightningstrikeandshut-inrequestsfrom the Moomba processing plant operator. Production comprised sales gas of 130 kboe (down28%),LPGof30kboe(down39%)andcondensateof40kboe(up24%).
Work continued on the Middleton gas compressionproject, with all equipment delivered to site andmechanical installation commencing subsequent toquarter-end. Compression will enable greater gasthroughputasfieldsdecline,andisexpectedtoprovidepeakproductioncapacityof3,700boepd.Theprojectisexpected to be completed in Q3 FY17, and the Middleton East-1 and Coolawang-1 wells are expected to beconnected during the quarter.
ExPEL513/632contributed42kboe(net)ofsalesgasand gas liquids production, down 16% from the priorquarterduetonaturalfielddecline.
SACB and SWQ JVs(Various non-operated interests)
Production from new gas wells online partially offsetnaturalfielddecline.Salesgasandgasliquidsproductionof925kboe (net)was4% lowerthanthepriorperiodandcomprisedsalesgasof790kboe(down5%),LPGof70kboe(up4%)andcondensateof65kboe(down1%).
Oil production was assisted by various productionoptimisation initiatives and limited downtime.Production of 190 kbbl (net) was 2% higher than theprior period.
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DEVELOPMENT
Cooper Basin
South Australian Gas – SACB JV(Fixed Factor Area Joint Venture: Beach 20.21%, Santos 66.6% and operator, Origin 13.19%)
Afive-wellgasappraisalanddevelopmentcampaignonthecentralflankof theBig LakeFieldwascompleted.The campaign included one standalone appraisal well(BigLake-134)andfourdevelopmentwellsdrilledfromasinglepad(BigLake-135to-138).Thecampaignaimedto expand the central development area and targeted thePatchawarraFormation,TirrawarraSandstoneandMerrimelia Formation, with the Epsilon Formationprovidingasecondarytarget.BigLake-137andBigLake-138werethefinalwellsofthecampaign.BigLake-137intersected approximately 80 metres of net gas payacross a 545metre gross section in the target zones,which was marginally below pre-drill estimates. BigLake-138 intersected approximately 83 metres of netpayacrossa463metregrosssectioninthetargetzones,whichwasin-linewithpre-drillestimates.Allfivewellsof the campaignwere casedand suspendedas futureproducers.
Atwo-wellgasdevelopmentprogramwasundertakenintheAllungaField,whichislocatedapproximately30kilometres southeast of the Moomba processing facility. The Allunga structure is a four-way dip closure withreservoirpropertiessimilartothoseoftheneighbouringBig Lake Field. Allunga-2 and Allunga-3 were drilledfrom a single pad and targeted the Epsilon andPatchawarra formations. Both wells were cased andsuspended as future producers, with Allunga-2intersecting 48metres of net pay across a 622metregross section, andAllunga-3 intersecting62metresofnetpayacrossa585metregrosssection.Resultswerein line with pre-drill estimates and support potentialfollow-updrillingaspartofabroaderfielddevelopmentplan.
Queensland Gas – SWQ JV(Beach 23.2%, Santos 60.06% and operator, Origin 16.74%)
Atwo-wellgasdevelopmentprogramwasundertakenin the Galex Field, which is located approximately 10kilometres southeast of the Ballera processing facility. The wells targeted undeveloped reserves in thePatchawarraFormation,withtheToolacheeFormationproviding a secondary target. Galex-4 intersected 45metres of net pay across a 183 metre gross section.Resultswerein-linewithpre-drillestimatesandthewell
wascasedandsuspendedasafutureproducer.Galex-5intersected six metres of net pay across a 211 metre grosssection.Thewellwascasedandsuspendedasafuture producer,with results broadly in-linewith pre-drillestimates.
Windigo-3was drilled as a deviated gas developmentwellintheWindigoField,whichislocatedinthecentralregion of the Cooper Basin’s south west Queenslandarea.ThewellwasidentifiedfollowingaregionalreviewoftheWindigoandRotifields,andtargetedsandswithinthePatchawarraFormationasaprimaryobjectiveandsands within the Epsilon Formation as a secondaryobjective. Windigo-3 was cased and suspended as afuture Patchawarra Formation producer followingintersectionof50metresofnetpayacrossa243metregrosssection,withresultsin-linewithpre-drillestimates.
EXPLORATION AND APPRAISAL
Cooper Basin
Western Flank Oil – ex PEL 91(Beach 100%)
The September-1 oil exploration well is locatedapproximately seven kilometres east of the Stunsail Field.Thewelltargetedoilwithinastructuralclosureatthe Namur Sandstone level and tested the McKinlayMember, Birkhead Formation and PoolowannaFormation as secondary targets. September-1intersectedaneightmetregrossintervalwithoilshowswithinthePoolowannaFormation.Adrillstemtestwasundertakenovertheinterval1,927.8metresto1,936.0metres and recovered 15.2 barrels of approximately 42 degreeAPIoilfromthedrillstringovera1.5hourflowperiod. Therewereno indicationsof formationwaterfromthetest. Theflowratewascalculatedtobe210bopdandthewellwascasedandsuspendedasafutureproducer. This discovery validates the PoolowannaFormationasanadditionalreservoirtargetwithintheexPEL 91 permit area. Review of results is currentlyunderwayandfurtherproductiontestingisplannedtoassess the resource size. Further mapping of thePoolowannaoilplaywillbeundertaken throughFY17,with potential appraisal and near-field explorationactivitiesinFY18.
TheOsmanli-1 oil explorationwell, locatedwithin theprimary ex PEL 91 oil fairway approximately fourkilometreswestoftheStunsailField,wasdrilledtotesta four-way dip closed anticlinal structure. The welltargeted the Namur Sandstone, with the mid-NamurSandstone, Birkhead Formation and Poolowanna
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Formation providing secondary targets. Strong oilshowswereintersectedattwolevelswithintheBirkheadFormation. A drill stem testwas conducted over thelower interval of 1,689 – 1,697metres for a six-hourflowperiod.Thetestrecovered52degreeAPIoilatacalculated rate of 50 barrels of oil per day, plus 50 barrels ofwaterperday.Aseconddrillstemtestwasconductedovertheupperintervalof1,651–1,664metresforasix-hourflowperiod.Thetestrecovered47degreeAPIoilat a calculated rate of 55 barrels of oil per day, plus 30 barrels of water per day. Thewell was subsequentlycasedandsuspendedasafutureproducer,withresultsindicatingapotentialwesternextensionoftheBirkheadFormationplayarea,andprovidingencouragementfortheKangaroo-1follow-upexplorationwells(tobedrilledinQ3FY17).
Western Flank Oil – ex PEL 92(Beach 75% and operator, Cooper Energy 25%)
ThePenneshaw-1oilexplorationwellwasdrilledtotesta four-way dip closed anticlinal structure locatedbetweentheChristiesFieldandtheButlers-Parsonsoilfairway.ThewelltargetedtheNamurSandstone,withthe mid-Namur Sandstone, Birkhead Formation andHutton Formation providing secondary targets.Penneshaw-1waspluggedandabandonedduetolackof commercial pay.
The Butlers-9 oil appraisal well was drilled to test apossiblenorthwestextensionoftheButlersField.Thewell is locatedapproximately15kilometressouthwestof the Callawonga Field and targeted the NamurSandstone, with the mid-Namur Sandstone, BirkheadFormation and Poolowanna Formation providingsecondary targets. Butlers-9 was plugged andabandoned due to lack of commercial pay.
Western Flank Oil – ex PEL 111 and PEL 424(Beach 40%, Senex 60% and operator)
The295km2Liberator3DseismicsurveywasacquiredinexPEL111.ThesurveycoverstheunmappednorthernextentoftheSnatcherFieldandareatoitswest,andistargetingNamurSandstoneandBirkheadFormationoilprospects.ProcessingofdatawillbeundertakenduringH2 FY17.
The220linekilometreKoonchera2DseismicsurveywasacquiredinPEL424.Thesurveyislocated25kilometresnorthwest of the Snatcher Field, where minimalexploration activity has been undertaken. Processingandinterpretationofdataisexpectedtobecompletedby the end of FY17.
Drilling Osmanli-1
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Western Flank Gas – ex PEL 106(Beach 100%)
Canunda-3isthefirstwellofathree-wellgasexplorationandappraisal campaignwithinBeach’s100%ownedexPEL106permitarea.TheCanundaFieldislocatedonthewesternedgeofthePatchawarraTrough,approximately45 kilometres northwest of the Moomba processingfacility. Canunda-3 targeted liquids-rich gas within astratigraphic trap in the Patchawarra Formation andreached total depth of 2,811metres on 31 December2016.Subsequenttoquarter-end,wirelineevaluationoftheprimaryPatchawarra target indicated1.6metresofnet pay. A drill stem test of the primary target produced liquids-rich gas at a rate of 1.9 MMscf/d on a 16/64”choke and 1,302 psig flowing pressure. In addition,wirelineevaluationofthesecondaryPatchawarratargetindicated 1.2 metres of net pay. A drill stem test of the secondarytargetproducedliquids-richgasatarateof1.3MMscf/d on a 16/64” choke and 730 psig flowingpressure. Canunda-3 was cased and suspended as afutureproducer,withfurthertestingrequired.Analysisoftestresultsisexpectedtoconfirmthattheprimaryandsecondary targets of Canunda-3 represent newdiscoverieswhicharenotconnectedtoexistingreservoirswithintheCanundaField.
South Australian Gas – SACB JVs(Fixed Factor Area Joint Venture: Beach 20.21%, Santos 66.6% and operator, Origin 13.19%)
Namur-4wasdrilledasastandalonegasappraisalwellin theNamurField,which is locatedapproximately25kilometres southeast of the Moomba processing facility. ThefieldwasthefirstNamurSandstonegasproducingdiscoveryintheEromangaBasin.Namur-4wasdrilledto evaluate reservoir potential of the PatchawarraFormation,andalsotoassessremainingrecoverywithinthe Namur Sandstone. The well intersectedapproximately28metresofnetpayacrossa221metregrosssectionintheNamurSandstone,andapproximately45metresofnetpayacrossa214metregrosssectioninthe Patchawarra Formation. Subsequent to quarter-end, Namur-4 was cased and suspended as a futurePatchawarraFormationproducer.Analysisofresultsiscurrently underway to gauge potential for productionfrom the other reservoirs, and to assess future drilling potentialinthefield.
Queensland Gas (Beach 23.2%, Santos 60.06% and operator, Origin 16.74%)
The Dunadoo East-1 near-field gas exploration well islocatedwithin the Coolah Complex, approximately 40kilometresnorthoftheBalleraprocessingfacility.Thewell was drilled to test a potential continuation ofregionalsandtrendsfollowingrecentsuccessfuldrillingin the Dunadoo, Coolah and Durham Downs fields.Dunadoo East-1 was plugged and abandoned due tolack of commercial pay.
RotiSouth-1wasdrilledas a standalonegasappraisalwelltothesouthoftheRotiandRotiWestfields.Thewell is located southeast of theWindigo Field in thecentral region of the Cooper Basin’s south westQueenslandarea,andwasidentifiedfollowingareviewof theRotiandWindigofields. Roti South-1 targetedsands within the lower Patchawarra Formation, withupper Patchawarra sands and the Epsilon Formationproviding secondary targets. Thewellwas cased andsuspendedasa futureproducer following intersectionof approximately 36 metres of net pay across a 193metregrosssectionwithinthetargetzone.Resultswerein-line with pre-drill estimates and provideencouragement for follow-up development drilling ontheRotiSouthstructure.
Other Australia – Otway Basin
T/49P – Offshore Otway(Beach 30%, 3D Oil 70% and operator)
Interpretationandmappingofthe974km2 Flanagan 3D seismic survey was completed. Based on Beach’sassessment of the permit’s risk-weighted financialreturnprofilerelativetootherprojects in itsportfolio,thedecisionwasmadetoceaseparticipationinthejointventure. Consequently, Beach advised 3D Oil of its intention to withdraw from T/49P, and its 30% non-operator interest will be assigned to 3D Oil for nilconsideration. ThisdecisionisconsistentwithBeach’songoingfocusonportfoliooptimisationanddisciplinedallocationof capital toprojectswithnear-term lineofsighttoproductionandfinancialreturn.
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WELL RESULTS
Area CategoryWells
SpuddedRig
ReleasedSuccessful
WellsSuccess
RateSuccessful Wells
Cooper Basin
Oil–Exploration 3 3 2 67% September-1;Osmanli-1
Oil–Appraisal 1 1 – –
Gas–Exploration 1 1 – –
Gas–Appraisal 3 3 3 100%Canunda-3;Namur-4;RotiSouth-1
Gas–Development 5 7 7 100%BigLake-137,-138;Galex-4,-5;Allunga-2,-3;Windigo-3
Total 13 15 12 80%
AllExplorationWells 4 4 2 50%
All Appraisal Wells 4 4 3 75%
All Development Wells 5 7 7 100%
Lycium Moomba
Jackson
Ballera
Namur-4
Galex-4,-5
Windigo-3
Allunga-2,-3
Canunda-3
Roti South-1
Big Lake-137,138
Osmanli-1
September-1
Butlers-9
Penneshaw-1
Dunadoo East-1
SA QLD
CE17-0004
COOPER BASIN WELLS(Q2 FY17)
COOPERBASIN
NSW
!( Gas well
!( Oil well
!( Well plugged and abandoned
" Facility
Beach operated permit
Beach non-operated permit
SACB and SWQ JVs
0 20 40 60 80 100 km
EROMANGABASIN
NT
WASA
VIC
NSW
QLD
TAS
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CORPORATE AND COMMERCIALGas sales agreement with Adelaide Brighton
BeachsignedagasprocessingagreementwiththeSACBJVinregardtoitswhollyownedexPEL106gas.Beachalso signed a GSA with Adelaide Brighton CementLimited,awhollyownedsubsidiaryofAdelaideBrightonLimited(ASX:ABC),forsupplyex-MoombaofprocessedsalesgasfromBeach’sWesternFlankacreage.TheGSAreplaces Beach’s former ex PEL 106 raw gas salescontract. Supply of gas commenced on 1 January 2017 and will continue for a 12 month term. Gas liquidsrecovered through processing at Moomba are being sold to the SACB JV.
BeachexpectsasubstantialupliftinnetrevenuefromitsWesternFlankgasacreageasaresultoftheGSAandgasprocessing arrangements with the SACB JV. Any gasproduction beyond GSA contract volumes will beavailableforsaleviathespotmarketornewcontracts.
Changes to Board size and composition
At the AGM held on 10 November 2016, Beachshareholders approved an increase to the maximum numberofdirectorsfromseventonine.Thisincreasewas considered prudent in order to provide flexibilityandallowadditionalappropriatelyskilleddirectorstobeappointed. The Board intends to appoint a secondSeven Group Holdings Limited nominee as a non-executivedirector.
Subsequent to the AGM, Beach advised of theunexpected passing of Doug Schwebel. Doug joinedBeachin2012asanon-executivedirectorandbroughtto the Board over 30 years of energy sector experience. Doug’stechnicalexpertiseandleadershipskillsprovedinvaluabletoBeach,andhiscontributiontotheBoardandsupport for fellowdirectorsweresignificant. TheBoard has commenced a process to recruit a director withappropriateexperience.
Changes to senior executive team
Beach announced changes to the composition andstructure of its senior executive team, which areconsistent with Beach’s growth strategy and followrecommendationsfromthe2016organisationalreview.Changesaresummarisedbelowandfurtherdetailsarecontained in the announcement of 23 November 2016.
• ChiefOperatingOfficer
Mike Dodd, formerly Group Executive ExplorationandDevelopment,wasappointedtotheroleofChiefOperatingOfficer,with effect from3 January 2017.Mike has 28 years of oil and gas experience. Hejoined Beach in 2007 and has been integral to the growth of its operated Western Flank oil and gasbusiness. Prior to Beach, Mike’s global experience includestheUK,USA,Egypt,AlgeriaandKazakhstan,and he has held senior technical and leadership roles atBG,SantosandAnadarko.
• GroupExecutiveExplorationandDevelopment
Jeff Schrull was appointed to the role of GroupExecutiveExplorationandDevelopment,witheffectfrom 3 January 2017, and brings to Beach over 30 yearsofupstreamoil andgasexperience. Jeffwasformerly General Manager Exploration andProductionatCueEnergy. HehasalsoheldseveralseniorinternationalpositionswithChevronovera19yearperiod,andwassubsequentlyCorporateGeneralManagerofExplorationatAddaxPetroleum.Jeffhasastrongtrackrecordincreatinganddeliveringgrowththrough exploration, development, operations,mergersandacquisitions.
• GroupExecutiveHumanResources
Kevin Hollingsworth was appointed to the newlycreated role of Group Executive Human Resources,with effect from 5 December 2016. The rolerecognises the importance of leading, managing and developing Beach’s people as part of its growthstrategy. Kevin brings to Beach over 30 years ofexperience in human resources, with particularexpertiseinexecutiveleadershipdevelopment,talentdevelopmentand thecreationofhighperformancecultures. Kevin was most recently Executive VicePresident Human Resources at Clough, and previously held senior management positions with WoodsideEnergy.
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GLOSSARY $ Australian dollars
AGM AnnualGeneralMeeting
API AmericanPetroleumInstitutegravity measure
ATP Authority to Prospect
bbl Barrels
Beach BeachEnergyLtd
Bcf Billion cubic feet
bfpd Barrelsoffluidperday
boe Barrelsofoilequivalent–thevolume of hydrocarbons expressed intermsofthevolumeofoilwhichwouldcontainanequivalentvolume of energy
bopd Barrels of oil per day
CooperEnergy CooperEnergyLtd
Cooper Basin Includes both Cooper and Eromangabasins
Delhi DelhiPetroleumPtyLtd
Drillsearch DrillsearchEnergyPtyLtd
DST Drill stem test
EP Explorationpermit
ExPEL91 PRLs151to172andvariousproductionlicences
ExPEL92 PRLs85to104andvariousproductionlicences
ExPEL101 PRLs173and174andvariousproductionlicences
ExPEL104/111 PRLs136to150andvariousproductionlicences
ExPEL106 PRLs129and130andvariousproductionlicences
ExPEL107 PRLs175to179
ExPEL218 PRLs33to49
ExPEL513/632 PRLs191to206andvariousproductionlicences
FY(17) Financialyear(2017)
GJ Gigajoule
GSA Gassalesagreement
H(1)(FY17) (First)halfyearperiod(ofFY17)
kbbl Thousandbarrelsofoil
kboe Thousandbarrelsofoilequivalent
kt Thousandtonnes
LPG Liquefiedpetroleumgas
MMbbl Million barrels of oil
MMboe Million barrels of oil equivalent
MMscfd Million standard cubic feet of gas per day
Origin OriginEnergyLtd
PEL PetroleumExplorationLicence
PEP PetroleumExplorationPermit
PRL PetroleumRetentionLicence
PJ Petajoule
Q(1)(FY17) (First)quarter(FY17)
Qtr Quarter
SACB JV South Australian Cooper Basin jointVentures,whichincludetheFixedFactorArea(Beach20.21%,Santos66.6%,Origin13.19%)andthePatchawarraEastBlock(Beach17.14%, Santos 72.32% and Origin 10.54%)
SACB and SWQ JVs
TheDelhioperations,whichincorporate the SACB JVs and SWQ JVs
Santos SantosLtd
Senex SenexEnergyLtd
SWQ JV South West Queensland joint ventures,incorporatingvariousequityinterests(Beach20-40%)
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