is the market missing beach energy’s potential, page-17

you can't say exactly what effect it would have on the share price, but my view is it would be a lot more than people would think;

This is just an example of what would happen if they did an on market share buy-back over 3 years and the profits remained flat ( I have used the below numbers just to make the point -these aren't the actual beach figures);

Market Cap: $1 Billion
Earnings: $100 million
Shares issued: 1 billion

So as this stands the earning per share is 10 cents per share and the value per share is $1 per share.

If they bought back 10% of the share's issued on the market in the first year and there was no growth in profit the following would be the case;

Market Cap :$1 billion
Earnings: $100 million
Shares issued: 900 million

Earnings per share 11 cents; value per share $1.10.

Year 2
If they bought back 10% of the share's issued on the market
Market Cap :$1 billion
Earnings: $100 million
Shares issued: 810 million

Earnings per share 12.3 cents; value per share $1.23.

Year 3
If they bought back 10% of the share's issued on the market
Market Cap :$1 billion
Earnings: $100 million
Shares issued: 729 million

Earnings per share 13.7 cents; value per share $1.37.


So the earning will grow per share just by buying back the shares even if the profit is flat; in reality I actually think the profits will grow over the next 3 years. So there would be a much bigger kick per share from a share buy back.

This would also stop the shorter's playing havoc with the share price and help stop the fluctuations in the share price and encourage investors to hold the stock.

As long as profits are growing a share buy back should help the stock get some momentum forward and up. I have seen a few stocks use this very successfully and given shareholders great return over 5 years by doing this.

Beach have plenty of Cash; approx $400 million; and they will be getting more cash from stage 2 of the Chervon payment if they proceed; they have a line of credit of $300 million (from memory). And if the western flank and the cooper basin oil keeps going the way it is they will have even more cash - high margin oil straight to cash.