No-Moat Beach Energy Posts Robust Third Quarter, Ideally Positioning it for Coronavirus Downturn.

We make no change to our AUD 2.65 fair value estimate for no-moat Beach Energy. The company reported a solid fiscal third-quarter performance with production up 8% to 6.9 million barrels of oil equivalent, or mmboe, only marginally below our expectations. Revenue fell 7% to AUD 431 million, close to expectations. Importantly, Beach ended the period with net cash of AUD 80 million, up 23% from end December, though down on February’s AUD 151 million. The company spent AUD 246 million on exploration and appraisal in the third quarter, including expensive Tawhaki-1 frontier exploration drilling. This will now clearly be wound back while energy prices plumb current lows. For the moment, fiscal 2021 capital expenditure guidance still targets deferral of just 30% of previously planned spend, though sensibly a review is underway. We currently assume a 40% cut.