Will the recent deal with Webuild position Beach Energy firmly in the coming period?

Key Takeaways:

1. Beach Energy has signed a contract with Webuild for Webuild to complete the delivery of the Waitsia Stage 2 project.

2. Waitsia Joint Venture and Webuild are aiming for first gas by 2023 closure.

3. Total capital expenditure to range between AU$400 to AU$450 million net to BPT.

Beach Energy Limited (ASX: BPT) was one of the stocks that gained market attention on 06 February 2022. It was among the top movers and ended the trading session with a 3.703% growth in the share price and settled at AU$1.57 following the release of Waitsia Stage 2 update. On 07 February 2023 at AEDT 1:47 PM, BPT shares are trading at AU$1.582, up 2.759% from the previous close. 

In this article, we will discuss the announcement made by the Company, the Company’s outlook and the significance of this project.

Waitsia Stage 2 update:

Beach Energy Limited (ASX: BPT) announced that it reached a deal with Webuild SpA (Webuild) for Webuild to complete the delivery of the Waitsia Stage 2 project. However, it is conditional upon completion of the Clough Limited’s voluntary administration and Webuild’s acquisition of Clough personal, systems and process to allow construction to continue.

After the due diligence and review of the cost and work schedules of Webuild, BPT amended its total capital expenditure estimate to range between AU$400 to AU$450 million net to Beach with the Waitsia Joint Venture and Webuild aiming first gas from the Waitsia Gas Plant 2023 end.

In 2023, the Company aims to work with Webuild and Mitsui to complete the project and begin the supply of LNG. At the same time, the Company will continue to meet with domestic commitments, with the first gas targeted by 2023 closure.

On 08 August 2022, Beach Energy confirmed the conclusion and signing of the LNG Sale and Purchase Contract with BP Singapore Pte. Limited, a subsidiary of BP plc. The Company confirmed that the LNG SPA would see bp buying all 3.75 million tonnes of BPT’s projected LNG volumes from the Waitsia Stage 2 project. Supply is targeted to begin in the 2H 2023 and will continue for ~5 years.

About Waitsia Stage 2 project:

Waitsia gas field is ranked amongst the largest gas fields ever discovered onshore in Australia. Waitsia Stage 2 will involve further gas field development, with more wells and a new production facility with the potential to produce 250 TJ/day.

It is expected to bring significant economic benefits to the Mid-West region during the construction and operating phases.

A Glance at Waitsia Stage 2 drilling results:

The six-well Waitsia Stage 2 drilling campaign was completed at the end of October 2022, and pressure data acquired from Waitsia added important data to the assessment of the drilling results and the update on reserves.

The Waitsia field comprises reservoir units in the Kingia and High Cliff sandstone formations, with the Kingia the primary reservoir. Reservoir characteristics of the Kingia were largely consistent with pre-drill expectations. Four of the six wells tested in line with expectations at rates up to equipment constrained 68 MMscfd. There was variance in reservoir depth, with some wells high and others low to prognosis due to usual seismic interpretation uncertainty.

Waitsia 10, the final well, tested the western extent of the field. However, there was no indication of gas, but it encountered a high-quality Kingia reservoir which is regarded as a separate water-bearing compartment. The well was plugged and postponed awaiting a decision on future options, including a potential sidetrack of the well.

Bottomline:

Based on the Company’s progress on the Waitsia project, the features, the results from the site, and the planned sale of LNG in 2023 and beyond could be of great significance. After the completion of the work and site and the beginning of the supply in 2H 2023, we can expect a significant improvement in the Company’s revenue numbers in the coming period.

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