Beach Petroleum (BPT $0.36) Buy> > > BPT set to join Gippsland...

Beach Petroleum (BPT $0.36) Buy
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> BPT set to join Gippsland Basin Oil Producers
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> 4 BPT has executed a farmout agreement with Anzon Australia Ltd (AZA)
> to acquire 25% of the Basker/Manta/Gummy (BMG) oil & gas fields, offshore
> Gippsland Basin. BPT also has an option to farmin for a further 12.5%
> 4 Under the agreement BPT will pay 33% of the field capex to earn its
> 25% interest. The premium to be payed by BPT is capped at $21.8m
> 4 The BMG fields contain 2P reserves of 23.3 mmbbls oil and 120bcf
> gas, first oil is anticipated in April 2006 at >20,000 bopd
> 4 The Basker-2 appraisal/development well, due to be drilled in
> May'05, is to potentially provide reserve upside and finalise the
> development concept before its planned commencement in Nov'05
> 4 Historically, the majority of Gippsland reservoirs have produced
> well in-excess of original reserve estimates
> 4 BPT will use a similar model used from its successful acquisition of
> the remaining interest (78%) in the Bodalla fields in SW QLD in 2002 - 13
> month payback was achieved, recoverable oil reserves increased by 56% and
> a 17% decrease in opex
> 4 BPT will also inject $10m in to AZA - $5m at a mezzanine level and
> $5m at IPO level which is expected when AZA anticipates listing in
> December. BPT should emerge with ~11% of AZA post IPO (AZA will hold 75%
> of BMG assets)
> 4 Importantly, we anticipate BPT should be able to fund its share of
> capex (~$65m) from existing cash reserves ($28m post AZA investment),
> options to be exercised in May'05 (~$15m) and operating cash flows
> 4 The purchase price of US$1.44/boe (based on the A$21.8m premium) is
> very acceptable, given a rough industry 10 year average for acquisitions
> of undeveloped 2P reserves in Australia is US$1.86/boe and current oil
> prices.
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> BPT Impact
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> 4 As a result of the farmin, BPT's hydrocarbon reserves will more than
> double from 4.8 mmboe to 10.6 mmboe (not including the contingent gas
> reserves)
> 4 Our BPT valuation (dcf @ 10%) increases by $0.08/sh to $0.51/sh
> 4 BPT production and earnings profile will be improved dramatically
> from FY'07 when its Cooper Basin production was due to drop off
> significantly
> 4 We forecast EPS to increase by 1.7, 6.0 and 1.0cps in FY'06, 07 and
> 08. The farmin is 0.4cps EPS dilutive for BPT in FY'05
> 4 BM oil is set to deliver BPT +$220m revenues over 5 years from FY'06
> 4 Reduces BPT's risk profile spreading production to a second major
> hub
> 4 The farmin provides BPT with a footprint in to Australia's most
> prolific hydrocarbon basin, where <50 mmbbl oil fields have been
> overlooked by the Esso/BHP JV.
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> Comments
>
> The BMG farmin and AZA investment provides BPT with a strong cash flows
> and potential for significant upside from BMG reserves and exploration
> targets. Cash flows are due to kick-in at a time when a drop off from
> BPT's Cooper Basin production was forecast.
> We are very positive on the farmin for BPT from all aspects and are
> confident it will deliver significant growth in to a high oil price
> environment over the next few years.
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> BMG Details
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> 4 The fields were discovered by Shell in 1983 and have since had
> various owners before WPL sold its 100% interest to Anzon in April 2004
> 4 Full development capex at this stage is A$180-200m
> 4 Basker has 2 wells, Manta and Gummy have 1 each
> 4 Basker-1 and Manta-1 were production tested - four zones flowed at
> constrained stabilised rates of 3-6,000 bopd each
> 4 The Basker and Manta oil accumulations are estimated to hold 2P
> recoverable reserves of 23.3 - 27.0 mmbbls (RISC and WPL reserves)
> 4 The Manta and Gummy fields hold recoverable gas reserves of an
> estimated 120-170 bcf (WPL)
> 4 Until 2002 when WPL acquired Newscorps 50% interest, the BMG fields
> were never wholly owned - we view this as the primary reason the asset was
> never commercialised
> 4 In 2001/2 WPL made the large Geographe and Thylacine gas discoveries
> in the offshore Otway Basin shifting its focus to this area
> 4 In April 2004 Anzon acquired WPL's 100% interest in the BMG fields.
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> Oliver Foster
> Resources Analyst
> Executive Director
> Euroz Securities Limited
>
> Level 14 The Quadrant
> 1 William Street
> Perth Western Australia 6000
>
> Ph: +61 8 9488 1431
> Mobile: 0403 316848
> Fax: +61 8 9488 1479
> Email: [email protected]
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