BEACH Energy is one of those "always a bridesmaid, never the bride" sort of stocks, but that can actually add to its appeal.
While it is overshadowed by its Cooper Basin neighbour Santos and big players such as Woodside, Beach has quietly and steadily built up an interesting portfolio of oil and gas projects.
It also has some significant expertise in drilling for unconventional gas, which could greatly extend the life and reserves of its Cooper Basin and other assets, and unleash an Australian version of the shale oil and gas revolution that has transformed the US into one of the world's oil and gas giants.
Beach's low profile bellies the fact it is Australia's sixth largest oil producer and the largest net oil producer out of the Cooper Basin, a status shown by yesterday's record underlying net profit of $142 million. That figure is unlikely to remain a record for long as Beach continues to ramp up production and gas sales contracts.
Chief executive Reg Nelson is forecasting a rise in barrels of oil equivalent of up to 16 per cent or between 8.7 million and 9.3 million barrels in 2013/14 as its Western Flank wells keep firing. He is also predicting that the oil price will remain strong when measured in Australian dollars, which seems to be a fairly safe bet.
One of the reasons for Beach's improved operating and financial performance is that it is churning out 34 per cent more oil.
Most companies would kill for an 83 per cent overall success rate on 98 wells drilled, but to be fair, Beach's Cooper Basin properties combined with modern seismic methods gives it a great head start.
Beach is a big beneficiary of the large LNG projects in Gladstone, which should see domestic gas prices on the east coast rise to meet the world market.
Beach has an active exploration program within Australia but an unexpected left-field overseas discovery could move the needle and give Beach the profile its success deserves.
Egypt looks the most likely to produce early results, with more drilling this financial year.
Romania, Tanzania and New Zealand are promising, but all face a much longer path to production compared to the high Australian success rate.
Beach is a buy on the back of solid results, good exploration potential and expanding profitable exposure to Australian dollar prices for oil and gas.
You don't have to be a financial genius to look at Billabong's accounts and wonder not only how it continues to operate, but how two separate consortiums are still fighting for the right to turn this mess around. It is probably best explained by the hypnotic attraction of the rapidly falling knife, which has apparently suckered in even the duelling geniuses at Altamont Capital/Blackstone and Centerbridge Partners/Oaktree Capital.
They are all trying to protect their "investment" in Billabong shares and debt, but with net assets plunging from more than $1 billion to $267 million, which is perilously close to net debt, avoiding this stock is the best way to keep your fingers intact.
There may yet be a juicy turnaround but it is not certain and shareholders may not get to enjoy it.
I have always had an extra dose of scepticism for companies based north of the Tweed River, which no doubt goes all the way back to Christopher Skase and the white shoe brigade.
Followed, of course, by a regular cavalcade of dodginess most recently demonstrated by the names MFS/Octaviar, City Pacific, Raptis Group, Asset Loans, BrisConnections and the spectacular implosion of Eddy Grove's ABC Learning.
However, there are some great companies in Queensland and perhaps the pick of them in size and longevity is Graham "Skroo" Turner's Flight Centre.
Its net profit for 2012/13 was upgraded a world-record three times, and there is every chance forecast earnings will break out of the predicted $370-$385 million zone.
With a balance sheet stacked with cash and the Aussie dollar in a sweet spot for overseas and domestic travel, Flight Centre is a buy.
The Herald Sun accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser.
BPT Price at posting:
$1.39 Sentiment: Buy Disclosure: Held
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