Beach Energy shares traded lower on Thursday following a pullback in global oil prices, despite reporting a strong earnings performance. Citi analyst Tom Wallington noted the company delivered a 7 per cent beat on underlying EBITDA of $558 million and a 22 per cent beat on its profit of $219 million. Beach Energy is an Australian oil and gas exploration and production company. It focuses on developing and operating oil and gas fields.
According to Wallington, the strong earnings before interest, taxes, depreciation, and amortisation was driven by several factors, including lower field operating costs, reduced royalties, higher other operating income, and lower other costs. These positive impacts were partially offset by increased tariffs and tolls. He also pointed out that exploration expenses of $66 million were again taken below the line, consistent with guidance provided in the December quarter update. One-off costs associated with the Waitsia ramp-up were higher than previously anticipated, reaching $41 million compared to the initially guided $24 million.
However, the interim dividend of 1¢ per share fell short of both VA and Citi’s expectations of 2¢. Wallington suggested that this lower dividend reflects a prudent approach, given the company’s need to extend its portfolio through mergers and acquisitions (M&A). Despite the strategic rationale, the dividend disappointment may negatively impact shareholders seeking immediate returns.
Wallington anticipates a neutral market reaction overall, with the positive earnings offset by the disappointing dividend and questions surrounding the quality of earnings. He believes a refreshed capital management framework is now likely to be presented in August. At the close of trading, shares in Beach Energy were down 4 per cent.
