Beach Energy Limited (ASX:BPT) Quarterly Report Ending 31 March 2010
Beach Energy Limited (ASX:BPT) Quarterly Report Ending 31 March 2010
Adelaide, April 29, 2010 AEST (ABN Newswire) - Beach Energy Limited (ASX:BPT) (PINK:BEPTF) releases Quarterly Report ending 31 March 2010.

CORPORATE

Essential Petroleum Limited

In February 2010, Beach Energy Limited ("Beach") settled its A$14 million receivable from Essential Petroleum Limited (ASX:EPR) ("Essential") as follows:

- A$2.75 million for a 50% interest in onshore permit PEP 168;

- A$1.00 for a 51% interest in Essential; and

- the balance of the debt was forgiven.

In April 2010, Beach's CEO, Hector Gordon, was appointed to act as Managing Director of Essential, to oversee its recapitalisation and rebuilding phase.

Unconventional Oil & Gas Farmins

Subsequent to the end of the March quarter, in mid-April, Beach entered into two agreements, to enhance the company's unconventional oil and gas portfolio. The first agreement is with Lakes Oil N.L. (ASX:LKO), under which Beach will pay up to A$10 million for a 15% interest in PRL2, located onshore in the Gippsland Basin, with the option of earning 50% by contributing a total of A$50 million. The Wombat gas field, contained within PRL2, has been estimated to contain a most likely contingent resource (or 2C) of 293 billion cubic feet of gas. The second agreement is with Sundance Energy Australia Limited (ASX:SEA) (PINK:SDCJF), in which Beach will pay US$1.3 million for an 18.5% interest in lease area section 25, being part of Sundance's South Antelope oil prospect in the Bakken shale of North Dakota in the USA.

PRODUCTION & SALES

Total production during the quarter was 1.7 MMboe, 11% lower than the previous quarter (1.9 MMboe). The decrease was due to weather related downtime associated with the Cooper Basin rain events and subsequent flooding. On 24 March 2010, Beach announced that forecast production for the 2010 financial year had been reduced from 8.0 MMboe to 7.8 MMboe. As the impact of flooding is expected to continue to have an effect for a number of months, forecast production has been further revised down by 0.4 MMboe to 7.4 MMboe.

Significantly, oil production from Beach's high margin operated Cooper oil assets is still expected to be relatively unaffected, primarily as a result of the installation of a pipeline network to gather production from its western flank Cooper Basin oil fields.

BMG FPSO Repairs Scheduled

Thruster bearing replacement work on the Crystal Ocean FPSO has, subsequent to quarter end, been completed. Although it will have some effect on production for the next quarter, production is about to be resumed.

Sales

Total oil and gas sales volumes for the March quarter were 2.0 MMboe, 19% lower than the December quarter (2.4 MMboe) mainly due to lower production levels.

Hedging

During the quarter, Beach entered into a new WTI oil price hedge, with a floor (or put option) to guarantee a minimum price of US$60/bbl for 50,000 bbls per month.

Beach also entered into a USD currency hedge, with a collar between AUD/USD of 0.7200 to 0.9000 for US$2 million per month.

All new hedges are for the period July 2010 to June 2011, to give further protection against a potential fall in the oil price and rise in the Australian dollar.

EXPLORATION & DEVELOPMENT

Capital expenditure fell by 77% in the March quarter largely due to flooding in the Cooper Basin. Exploration expenditure during the quarter benefited by some recoupment of costs, mainly from an insurance recovery from the drilling last financial year of the PeeJay-1 well in the Bass Basin, A$4.5 million as well as a reallocation of other costs from exploration to development, A$3.8 million.

COOPER & EROMANGA BASINS

Beach Operated

Development

Extended production tests to assess gas volumes and potential flow rates for the Brownlow and Canunda gas/condensate discoveries in the PEL 106 FI Block (Beach 50%), commenced in January with Brownlow-1. The test was suspended and has not been able to recommence due to wet weather and flooding.

Artificial lift projects have been approved by the PEL 92 (Beach 75%) Joint Venture for the Butlers and Perlubie South wells. These projects will produce a combined initial incremental rate of several hundred barrels of oil per day, gross.

Reviews of all Beach operated fields are underway to identify drill, in-wellbore and surface optimisation opportunities.

Exploration

A six well drilling program, including four wells in PEL 91 (Beach 40%) and two in PEL 92 (Beach 75%), planned for second quarter 2010, has been deferred. Start date for the program will be dependent upon the extent of flooding in the region and rig availability. Prospects to be addressed are within existing 3D seismic data areas and near to recent discoveries.

A total of 210 square kilometres of 3D and 230 kilometres of 2D seismic were acquired in PEL 92 (Beach 75%) during the quarter.

The PEL 91 Joint Venture (Beach 40%) approved a 434 square kilometre 3D seismic survey which will address exploration prospectivity in the block. Acquisition will commence when seismic crews are able to gain access to the area. Floodwaters from the Cooper Creek may impact on the extent of the survey that can be acquired.

The recently acquired Acavus 3D seismic survey in ATP633P (Beach 100%, Santos (ASX:STO) earning 50%) is currently being processed. The final dataset is expected by end April 2010.

Shale Gas

Planning continued during the quarter on design of the Holdfast-1 shale gas exploration well in PEL 218 (Permian strata: Beach 90%). A rig has been contracted and will commence drilling in July. Subsequent to the end of the quarter, plans for a second shale gas exploration well, Encounter-1, approximately 20 kilometres south east of Holdfast, were announced.

Santos Operated - Oil

Three oil appraisal/development wells were drilled during the period, all of which were successful. Four wells drilled on the Tickalara Field (Total 66 Block, Queensland, Beach 30%), during the March 2010 and December 2009 quarters, have proved the extent of undrained oil on the flanks of the oilfield and may lead to further drilling later in 2010. During the same period, three wells on the Narcoonowie Field in South Australia were successful, with Narcoonowie-10 the highlight, discovering a new oil pool in the Namur Sandstone.

Drilling was suspended late in the quarter due to flooding. Subject to no further rain, it is anticipated that drilling in Queensland may re-commence mid-May.

Santos Operated - Gas and Permian Oil Development

Two rigs were moved to the Coonatie Field in South Australia for a seven-well gas program that is expected to develop 21 BCF of gas reserves. These wells are designed to access gas located on the flanks of the large Coonatie dome. The first of these wells reached total depth but local rain and flooding have prevented the well from being cased. The two rigs were subsequently isolated by floodwaters, with road access not expected until mid-June for one rig and mid-July for the second rig.

EGYPT

North Shadwan (Beach 20%)

The NS377-5 development well was cased and completed after encountering a 107 metre gross oil column in the primary target Kareem Sandstone. Although a smaller column was encountered than in neighbouring NS377-3 (145 metres), reservoir quality is better and the well is anticipated to produce at a similar rate to NS377-3, in the range 1,500 to 2,000 barrels of oil per day. Artificial lift was installed prior to the rig release.

The Operator (BP Egypt) has indicated first production from the field is anticipated during the second half 2010. Development drilling will next focus on the NS385 oilfield to the south. The NS377-4 (Teen-1) exploration well was plugged and abandoned.

South East July (Beach 20%)

Dana Petroleum PLC has taken over as operator of the permit from Santos.

BMG PROJECT (Beach 30%)

During the quarter ROC Oil Limited (ASX:ROC), the Operator, announced a reserve write down for the BMG project from 18 MMbbl of oil to 3 MMbbl based upon an integrated subsurface review. At 30 June 2009, Beach reduced its reserve booking by 60% to 2.4 MMbbl. The Operator's new reserve estimate could imply a net 2P reserve to Beach approximately 1 MMbbl below that currently booked, net of year to date production. However, Beach will formalise its reserve position after ongoing study work has been completed.

The process to procure a new FPSO for the project has been suspended awaiting the outcome of the reserves review.

The BMG Joint Venture is revising the list of potential development options to determine the most economic way forward for the existing oil project, as well as the potential incorporation of the gas project.

OTHER EXPLORATION

Albania - Durresi Block (Beach earning 25%)

The Joint Venture is waiting for advice that the submission of the Petroleum Complimentary Agreement (PCA) to the Council of Ministers has been ratified. Upon ratification, an effective date will be set for commencement of concession operations.

New Zealand - PEP 38259 Canterbury (Beach 20%)

Re-processing of the Barque 2D seismic survey was completed and final sections were distributed to the Joint Venture in early February 2010. Interpretation has commenced.

Geothermal - Paralana Project (Beach 21% - earning)

Cased hole logging at Paralana-2 has been completed. Temperature measurements at 3,674 metres, near the maximum accessible depth in the borehole, indicated a temperature of 176oC. This exceeds the minimum temperature of 170oC targeted for development of the resource.

Plans for perforation and fracture stimulation of the prospective zones in Paralana-2 may be delayed to May/June, or later, due to flood waters restricting mobilisation of equipment from Moomba.

FINANCIAL INFORMATION

During the March quarter Beach declared and paid an interim partially franked dividend of 0.75 cents per share based on its interim financial results for the six months ended 31 December 2009.
--------------------------------------------
Details of 2010 interim dividend
--------------------------------------------
Record date           - 31 March 2010
Payment date          - 23 April 2010
Amount of dividend    - 0.75 cents per share
Franking percentage   - 13.33%
DRP share issue price - A$0.73
DRP discount          - 5%
DRP pricing period    - 7-16 April 2010
--------------------------------------------
Cash reserves rose by A$22.9 million primarily due deferral of maintenance and capital costs resulting from flooding in the Cooper Basin. Beach continues to be in a strong financial position with an increasing cash reserve of over A$140 million, nil debt and a A$25 million working capital facility at its disposal.
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Capital Structure              12/2009          03/2010    % Change
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Fully paid ordinary shares  1,080,653,789   1,080,653,789     0%
2008 Bonus Options            102,552,082     102,552,082     0%
Unlisted employee options      12,531,510      12,531,510     0%
Unlisted employee rights        5,343,187       5,343,187     0%
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DRILLING PROGRAM

Beach participated in five conventional oil/gas wells during the March quarter. Overall, four of the five wells drilled were successful, indicating an 80% success rate.
------------------------------------------------------------
Area     Category           Wells   Successes   Success Rate
------------------------------------------------------------
Cooper  Exploration - Oil     1         0             0%
          Appraisal - Oil     1         1           100%
        Development - Oil     2         2           100%
------------------------------------------------------------
Egypt   Development - Oil     1         1           100%
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          TOTAL               5         4            80%
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For the complete Beach Energy Quarterly Report, please click the following link:

http://www.abnnewswire.net/media/en/docs/62738-ASX-BPT-177854.pdf

About Beach Energy Limited

Beach Energy Limited (ASX:BPT) is a long established oil and gas Exploration and Production Company, based in Adelaide, South Australia.

 


Contact

Reg Nelson / Hector Gordon
Corporate
Beach Energy Limited
TEL: +61-8-8338-2833

Steve Masters / Nicola Frazer
Investor Relations
Beach Energy Limited
TEL: +61-8-8338-2833



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