Beach Energy Limited (BPT.AX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome. My name is Glenn Davis, I'm the Chair of Beach Energy, and I declare open the 2021 Beach Energy Annual General Meeting. We acknowledge the traditional country of the Kaurna People of the Adelaide Plain, and we pay our respect to their Elders, past, present and emerging. We also recognize and respect their cultural heritage, beliefs and spiritual relationship with the land and acknowledge that there are continuing importance to the Kaurna People today. This year, we're again holding the AGM in a virtual format because of COVID-19. As Australia is soon to open up, hopefully, a more regular format will return next year. The online platform we're using today allows shareholders, proxies and guests to attend the meeting remotely, and all attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes on the poll in real time. Our compliance statements set out on Slide 3 of today's presentation, for those of you who want to review it later. I'm joined today in the room by our acting Chief Executive Officer, Morné Engelbrecht, who will address to you shortly; and the rest of my fellow directors, Phil Bainbridge; Colin Beckett, Sally-Anne Layman, Ryan Stokes, Peter Moore, Joycelyn Morton and Richard Richards have all joined the meeting virtually. Margaret Hall, who was up for election at resolution today -- resolution 2 today, I'm sorry, has also joined. Also attending virtually is Mr. Anthony Jones from our auditors, Ernst & Young. Anthony is available for questions in relation to the 2021 financial accounts and remuneration report, should there be any. I'd also like to welcome all of our shareholders who are participating online. Before we move to the formalities, there are several housekeeping matters to mention. For obvious reasons, Resolution 3 is withdrawn and won't be put to the vote today. In terms of participation, shareholders have been provided with instructions as to how to participate and vote at the meeting, with details available on our website along with guides for how to participate online through your desktop or mobile device. We've received a number of questions from shareholders in advance of the meeting, which will either be addressed in my formal remarks or I'll endeavor to address them during the course of the meeting. There are a number of instructions to assist you this morning. Questions can be submitted through the online meeting platform at any time during the meeting. This will open the question component of the platform. [Operator Instructions] Question time will be at the conclusion of the CEO's presentation. And as I've said, in an effort to streamline the virtual format, we won't be pausing for questions after I put each resolution later in the meeting. Consistent with best practice, I have determined that all items of business will be decided on a poll today. I'll open the polls now and keep them open, so you can vote at any time during the meeting until I close the poll later. If you're eligible to vote at this meeting and have logged into the online platform, a voting icon that looks like a bar graph will appear on your device screen or navigation bar. Once you've selected this, the resolutions will appear on your screen and you can select a voting option. There is no need to hit a submit or enter button as the vote will be automatically recorded. Doris Gray from Computershare will act as the returning officer for the purposes of conducting and determining the results of the poll, and the results of which will be announced to the ASX later today. The Voting icon should appear as soon if it hasn't already, please select your votes at any time. You can change your vote at any time during the meeting up until I declare the poll is closed later. I'll provide a warning before declaring the poll for all resolutions closed to allow sufficient time for your votes to be submitted. If you're having any difficulties in locating the voting icon, please refer to the detailed guides available on the Beach Energy website. With those instructions behind us, let's now move into the rest of the meeting. I want to commence my remarks this morning by discussing our people. Beach is a team of 550 hard working dedicated people. They're led by an excellent group of executives, who, between them, collectively, have almost 200 years of experience. Unfortunately, we lost one of our executives, our most senior executive last week. After coming on board 6 years ago, our MD, Matt Kay, tendered his resignation. Whilst that's close to the average span of a CEO in corporate Australia, we're very sorry to see Matt go. Matt has done exactly what he was asked to do when we approached him over 6 years ago. Through the latest acquisition, he has grown the business substantially. Through that growth, he has diversified the company across multiple basins and production hubs delivering gas into tightening Australian East Coast, New Zealand and LNG markets. Matt brought a great focus to safety and improved our safety culture and performance to achieve our best year ever. And importantly, he built a team of highly talented executives who, we're confident, will take the company forward. The Board and I commend and thank Matt for everything that he has done. Matt, you did a tremendous job of which you should be justifiably proud, and I wish you all the very best. We will, of course, commence a process to identify Matt's long-term successor, but that will take some time. In the interim, Morné Engelbrecht has been appointed as our acting Chief Executive Officer. Morné has more than 20 years of experience, has been our CFO for more than 5 years, and he knows our business intimately. The board has every confidence in Morné, the executive and the broader Beach team in continuing to execute on our strategy. They've all been doing a great job, and we know that they will continue to do so. At Board level, Joycelyn Morton is not standing for reelection today. Joycelyn has a couple of exciting new boards that will keep it fully occupied, and we wish you the very best and thank you for her hard work and commitment as a Beach Director. We are, of course, in the process of considering options for a replacement director. And we also lose Ryan Stokes from the Board today. Thank you, Ryan, for your contribution and dedication at Board level over the last 5 years, and we wish you all the very best as Seven Group Holdings continues to grow. Despite these changes, our strategy doesn't change. And the last 12 months have been extremely busy as the team delivers on that strategy. First and foremost, FY '21 was our safest year on record, something we take significant pride in given the level of activity in delivering on our substantial projects. I want to thank and congratulate our staff and contractors on an outstanding effort and please keep up that great work. Our production for the year was, of course, substantially impacted by the decline experienced on the Western Flank, and Morné will discuss this in more detail shortly. But despite those challenges, the diversity and resilience of Beach saw the company record an underlying net profit of $363 million in FY '21. As we continue our growth campaign, the company's strong balance sheet allows us to invest circa $1 billion in FY '22 as we move towards our FY '24 production target of 28 million barrels of oil equivalent. In delivering on our growth ambitions, Beach continues to focus on its ESG performance with some of our endeavors set out in the slide. We recognize that climate change is one of the most important global challenges of this century. We accept that we have a role to play in managing our carbon emissions. We've set ourselves a real near-term emissions reduction target. And as at the end of FY '21, we're pleased to be about halfway to meeting our '25 -- FY '25 plan. physical plant modifications and a conscious change in our approach to operations have contributed to this. And our recent commitment to the Moomba CCS project will see a step change in reducing our emissions in 2024 when we'll start injecting carbon into depleted reservoirs in the Cooper Basin. Morné will address to you shortly about that project and other operational issues, but before he does, we should pause to reflect on and celebrate Beach's 60th birthday this financial year. The company has come a long way from the one that drilled its first well in 1962 at a location that's now the [ night hole ] on the Grange Gulf Course here in South Australia, and the revolution is continuing. In 2023, we'll join the exclusive LNG sales club, and we'll be well positioned as a key supplier of domestic gas in both Australia and New Zealand across multiple basins and markets. Whilst much has been achieved in the last 60 years, as always, there's still more work to be done. That work is being done by a dedicated and motivated team at Beach, who I thank for all of their efforts over the past 12 months. And finally, thank you to you, our shareholders, for your continued support. With that, ladies and gentlemen, I'll hand over to Morné. Thank you.

Thank you, Glenn. Hello, and welcome to everyone joining us today. For those who don't know me, my name is Morné Engelbrecht, and I'm the acting Chief Executive Officer of Beach Energy. Glenn has already covered off on Matt's departure, but I want to also thank him for his efforts in transforming Beach into the company that it is today, a company that is not only diversified but one that is poised to deliver future growth for shareholders. I look forward to sharing more information about that shortly. But first, I wanted to give you a little bit of history about myself. I joined Beach as Chief Financial Officer in 2016. Over that time, I worked closely with Matt and the Board on delivering Beach's growth aspirations while maintaining our financial strength. This included the acquisition of Lattice Energy, the bolt-on acquisitions of Senex' Cooper Basin and Mitsui's Bass Basin interests and then the commencement of our current gas and LNG growth agenda. We are successfully managing this growth despite having to navigate the global pandemic in a period in which oil prices dropped to their lowest levels in more than 20 years. As at 30 September, Beach is [ in ] a net cash position of $43 million, and our balance sheet is fully funded to support our FY '24 growth target of 28 million barrels of oil equivalent. So our financial strength has set, our strategy is set and myself, my executive and the whole Beach team is locked in on delivering our growth targets. Speaking of our strategy, it has been clear and consistent over the past 5 years, and that remains the case today. The key pillars of that strategy are as follows. We aim to optimize our core strategic assets by keeping them fuller for longer. In short, that means maintaining and increasing supply to 8 gas plants across Australia and New Zealand. In doing so, we intend to uplift our production to 28 million barrels of oil equivalent by FY '24 before any exploration or development upside, outside of committed projects and enterprise. We intend to maintain our financial strength. As mentioned, we are in a net cash position, and given the material and stable gas revenues, despite our material reinvestments in FY '22 and '23, we don't see net gearing moving about 10% for the next few years with the current portfolio. We have continued to strengthen our gas business by reinvesting in our strategically positioned gas assets. We'll have 16% share of the East Coast Gas market, approximately 8% share of the New Zealand market and our first ever LNG sales expected in the second half of 2023. As you know, we assess on a regular basis inorganic growth opportunities. We use that approach to totally recreate the company in 2019 through the Lattice acquisition, and have made further bolt-on portfolio acquisitions where the metrics made sense. We are always hunting, but have robust thresholds, and we have no burning need to put -- to change our portfolio at this time. As you've heard from the Chairman, we have made significant progress on our aspiration to meet net 0 by 2050, both through our operated and nonoperated endeavors. Safety takes precedence in everything we do at Beach. So it's with a lot of pride to inform you that we achieved our safest year on record in FY '21. Our recordable injury rate has improved by more than 85% over the last 6 years. That performance has continued into FY '22. It's been more than 1.5 years and 4 million work hours since we've seen a lost time injury. We've done this in the face of the high-risk profile that our busiest period has represented work [ hour wise ]. As the Chairman stated, FY '21 was a highly active year for Beach but not one without its challenges. Beach recorded production of 25.6 million barrels of oil equivalent in FY '21, down 4% on the previous year but at the high end of our revised FY '21 guidance announced to the market on 30 April 2021. Key highlights from the financial year include reaching a financial investment decision at Waitsia Stage 2 making 2 gas discoveries in the Victorian Otway Basin and Artisan and Enterprise, completing 2 strategic bolt-on acquisitions and reaching favorable outcomes in our 2 Lattice East Coast Gas sales price reviews as well as the carbon liability associated with the Cooper gas sales agreement. This was offset by the downgrade in Western Flank 2P reserves, which I'll recap the details shortly. We are continuing our pursuit of value-accretive growth in our gas portfolio, which will deliver stable and long-term revenue streams, provide diversification across 4 gas markets, improve our positioning in the tightening East Coast gas market and enable us to access global LNG markets. Before I discuss the Western Flank decline, I wanted to provide you with a little bit of context about the historical performance of these fields. The slide currently on the screen gives the illustration of how the Western Flank [ oil storage ] has developed over the past 5 years. The chart on the left-hand side shows that at the end of FY '16, Western Flank oil production was in decline. This decline and risk exposure of being active in just 1 basin drove Beach towards a diversification strategy which culminated in the Lattice acquisition. However, the introduction of horizontal drilling and the subsequent development of McKinlay reservoir, so Western Flank will deliver an unexpected but welcomed second production peak. The right-hand chart highlights this peak and shows the role the McKinlay played in delivering record levels of production over the past couple of years. The production came at an opportune time as the additional cash flows enabled us to pay down our circa $1 billion of debt with the Lattice acquisition within 18 months, pay $150 million in fully franked dividends to shareholders and reinvest about $2 billion back into the business at a return of capital of 17%. In the first 3 quarters of FY '21, each undertook a drilling campaign in the Western Flank. The initial production results from this drilling campaign were below Beach's predrill expectation. This led to Beach undertaking a comprehensive review of the production data and other data collected from the drilling campaign to understand the causes and whether the implications were short term or the result in a reduction in reserves and/or production outside of FY '21 guidance. This is not a simple piece of work and required significant inputs from numerous disciplines and evaluation of ongoing production data. On completion of this review, Beach concluded that most fields low well saturations, particularly on the flanks of the fields, was resulting in low well recoveries. In Bauer, the unanticipated levels of interference between the wells was, at least, partly attributable to competition between wells and not just escalation of production. And a field outside of Bauer, the fields were flatter [ thought ] leading to a reduction in total volume. The findings are consistent with 2P reserves being below our [ FY '20 ] 2P reserve estimate. Accordingly, Beach announced a reserve downgrade of Western Flank 2P oil reserves of 13.4 million barrels and Western Flank 2P gas reserves of 5 million barrels of oil equivalent. Monitoring our production continued following the April announcement and our financial year and 2021 reserve statement released in August noted no further material change to the 2P reserves of the Western Flank. Following a subsurface review of the Western Flank acreage, we have now recommenced drilling activities. The single rig FY '22 program aims to reduce the client experience within the Western Flank well fields by drilling of additional wells in existing fields, better constrained existing fields yet to be fully developed and discovered new oil fields and discover new gas fields to extend plateau production at the Middleton gas plant. The Western Flank remains a low-cost, value-accretive asset in the Beach portfolio. With low-cost tiebacks to existing infrastructure, the well -- development well, internal rate of return ranges from 15% to more than 100%. Production from new Western Flank well discovery is not included in the base case FY '24 production target, but will be a welcome addition in the drill bit -- if the drill bit delivers some positive results. Our base scenario has a target of 28 million barrels of oil equivalent production in FY '24, representing a 13% compound annual growth rate relative to the midpoint of our FY '22 production guidance of 21 million to 23 million barrels of oil equivalent. The forecast production comes from existing 2P reserves in committed projects, including those currently in the execution phase. In this base case scenario, we assume that no production from any Western Flank exploration success and a continued natural decline in production from the existing fields. The same has also assumed for BassGas in this time we know. Cooper Basin JV production is assumed to remain flat through continued drilling, predominantly in existing discovered fields in line with the operators' predictions. The Cooper Compression Project represents the first new gas to support this growth target, but the main growth is spread almost equally between development projects already underway in the Perth and Otway Basins. In the second half of FY '22, we will see the 2 Geographe wells come online and deliver volumes into the Otway gas plant. Then in FY '23, the Thylacine and Enterprise wells to deliver gas into the Otway Gas Plant. Where Waitsia Stage 2 sites produced in FY '24. The continued execution of our strategy over recent years has created a diverse portfolio of high-returning asset with reinvestment opportunities and assets [ last ] generally beyond 15 years, which today represents 6 production and development hubs. And by the end of 2023, we expect to have 8 operational Gas Plants serving 4 gas markets, including the global LNG market. The [ act of ] agreement [ rich ] with bp in recent weeks as something shareholders should be proud of. From 2023, we will join the exclusive club of LNG producers with favorable contract terms. The LNG price will be linked to Brent and JKM with uncapped upside exposure to each and also includes downside price protection. With the inclusion of LNG, our spread of portfolio provides material opportunities and significant downside protection. The reason Beach has deliberately positioned itself over the recent years to be a material gas player across multiple markets is because we fundamentally believe in the ongoing need for natural gas in a decarbonizing world. Tightness in LNG markets and the looming shortfalls on the East Coast of Australia only reinforces that thinking. If you've been reading the press in the recent weeks, you will have seen the mine for LNG surging as the northern winter arrives, and we expect this trend to continue in the medium term. To help us reach our growth targets, our capital expenditure guidance for FY '22 is between $900 million and $1.1 billion. Our capital investment revolves around the offshore Otway and Waitsia Stage 2 project developments, which make up roughly 45% of our CapEx spend; the drilling of up to 90 wells within the Cooper Basin JV to boost production levels from FY '22 onwards; the recommencing of exploration drilling activity in the Western Flank with up to 15 oil exploration wells this year; progressing front-end engineering design activities for the Trefoil project and undertaking 3D seismic acquisition across offshore Bass Basin. Importantly, as we have highlighted in previous slides, even investing in further growth in each of FY '22 and '23, net gearing is expected to remain below 10% over this period. So overall, the company moves into this stage of growth agenda in an excellent financial position. I'm pleased to say that FY '22 has gotten off to a positive start with the company notching up some early runs on the board. Key highlights for the first 5 months of the year include the Geographe 4 and 5 wells in the Otway Basin being drilled and intersecting reservoirs in line with pre-drill expectations. Waitsia Stage 2 construction commencing and [ bits ] signing [ a heads ] of agreement with bp for all of its LNG volumes from that project through to 2028. The Kupe Inlet Compression Project now complete, with the plant delivering an uplift in gas to the New Zealand domestic market and reaching final investment decision on the Moomba Carbon Capture and Storage Project with our joint venture partner and operator Santos. The second half is expected to be just as active as we look to start delivering gas from the Geographe wells into the East Coast gas market via the Otway gas plant. The Ocean Onyx will also continue its offshore activities with the drilling of 4 Thylacine wells, which are the final wells to be drilled as part of the Otway offshore program. As previously mentioned, we will recommence our Western Flank oil exploration drilling campaign in the new calendar year. Shifting gears just a little. I want to cover from Beach's approach sustainability. In particular, our focus on reducing emissions. Beach is committed to reducing its emissions footprint from both an operated and equity perspective. To that end, we have reduced our operated emissions 12% on our FY '18 levels, and we have committed to offsetting all reservoir CO2 from the Waitsia Stage 2 project. Beach also took a huge leap forward in its emissions reduction ambitions last week by reaching a final investment decision on the Moomba CCS project. This project is arguably the jewel of our emissions reduction crown and represents an exciting opportunity for Beach to join [ Vanguard ] companies pursuing this technology. The project, which is operated by a joint venture participant in Santos, will reduce CO2 emissions from the gas extraction process at the Moomba gas plant. This represents more than 60% of our total emissions from the Cooper Basin joint venture operations. It has the potential to significantly reduces -- produce Beach's equity emissions once operations commenced and learnings from the Moomba CCS project may potentially be deployed across other parts of Beach's portfolio. Before I hand back to the Chairman, I wanted to quickly reiterate the key takeaways. Just take into account of our committed growth projects, we expect to deliver an FY '24 production target of 28 million barrels of oil equivalent. This target excludes exploration success and pre-FID projects, with enterprise being the only exception. We are pleased about the progress made to date, and we are looking forward to delivering this part of our growth phase. Our balance sheet is solid with the company in a net cash position of $43 million as at 30th September. Given the material and stable gas revenues, despite our reinvestments in FY '22 and '23, we don't see net gearing moving above 10% for the next few years with the current portfolio. We have deliberately created a diverse gas business. By the end of 2023, we expect to have 8 gas plants producing from 5 basins. These plants will deliver gas to 4 markets including a focus on the short East Coast gas market and the global LNG market. The breadth of that gas business not only provides downside protection, but also creates a stream of stable and predictable cash flows. From FY '24, we expect to be in a position of material free cash flow, which creates multiple forward capital management alternatives. Last, but certainly not least, we are focused on being a sustainable company that can support energy transition. We have a net 0 aspiration by 2050. We are really delivering emissions reductions on our operated assets. And, in addition, the Moomba CCS project provides us with an opportunity to make a material step towards our net 0 ambition. With that, I'll now hand back to the Chairman. Glenn?

Thank you, Morné. Now turning to the formal items of business on the agenda today. The Notice of Meeting dated 8 October 2021 has been made available to all shareholders and is also available on Beach's website. There being no objections, the notice of meeting will be taken as read. As noted at the beginning of the meeting, rather than stepping through each item of business in turn and closing the poll on each resolution separately, I'm going to accept submitted questions on all items of business now. Once the Q&A session is concluded, I'll put each of the resolutions in turn, formally to the meeting. We'll then finalize the poll for all of the items of business. And in an effort to streamline the virtual process, there won't be a separate Q&A session after each resolution is put. [Operator Instructions] As I mentioned earlier, the poll is also open, so please don't forget to vote. I'm going to ask Chris Burford, Beach's Manager of Corporate Affairs, to read the questions. Chris will operate as the moderator, also introducing any verbal questions received. Chris, can I have the first question, please?

Thank you, Chair, and we'll begin with a couple of pre-submitted questions. The first are 2 similar questions regarding the Waitsia development received from Schmidt Superannuation and Mr. Robert Lee Peterson. With regards to the Waitsia LNG business, why haven't the joint venture partners, Mitsui and Beach Energy, accelerated the project so that exports of LNG can start earlier and take advantage of the current shortage and higher LNG prices?

Thanks, Chris. Look, the Waitsia project, where we took FID back in February of 2021 with Mitsui is an exciting project for us. We have just broken ground there and have started our construction work with Clough, our lump sum contractor. That project will see us exporting LNG cargoes at the back end of calendar year 2023, so in the FY 2024 year. And that fits quite nicely with what we see as the market for LNG. And as Morné just mentioned, the heads of agreement that we've entered with bp exposes us to both Brent and KJM upside and gives us downside protection as well. So it's an exciting project, something for shareholders to look forward to.

The next question is from Ms. [ Carly Anne Ria Jones ]. Climate change is a global threat to humanity. What is Beach doing to divest itself from fossil fuels and to reposition itself into markets that do not cause climate destruction.

We're not divesting ourselves of fossil fuels, and we're not shutting down the business. We don't think that's in the interest of members or society at large, frankly. If you look at the international energy agency scenarios, on all of those scenarios, gas demand grows over the next few years. In a number of its scenarios, gas continues to grow thereafter. If the way to net 0 is actually through the stated policy scenario, the IEA tells us we have to spend twice as much as we currently spend on oil and gas development to keep up the energy supply that the world needs. If you look at other forecasts, whether it's Mackenzie, [ DNV ] Ryan Stokes, they all say globally, they expect gas demand to continue out to 2040. And locally, whether it's the ACCC, AEMO, Wood Mackenzie, EnergyQuest, demand here is not going to be met by current supply on the East Coast unless an LNG import terminal is up and running in very short order. And even if it does, demand is going to outstrip supply by 2030, again, as AEMO said in its [ ASP ] last year, the industry needs to find somewhere between 120 and 285 pit of jewels of gas every year between now and 2040 to keep up with expected demand. So against that backdrop, we don't think it's a responsible thing for our members or society for us to be shutting down what we're doing.

The next question is from Mr. John Roy [ Malian ]. Dividends should be triple what they are now. Beach can do better towards shareholders like myself, a longtime shareholder. Beach is a good company.

We understand that shareholders want increased dividends. We would like to pay increased dividends but with $1 billion capital program in FY '22 when we consider dividends. We again thought that the prudent thing to do from a balance sheet management perspective is to maintain the dividend of $0.02 per share.

The next question is from Mr. Robert Lee Peterson. Beach Energy has not given EBITDA guidance for FY '22? Would it be possible for Beach to at least provide the half year revenue and EBITDA guidance for FY '22? Surely, by early November 2021, Beach Energy should be able to provide an idea on how they're performing for the first 6 months of FY '22?

We've made a decision as a company that we won't be giving EBITDA guidance, however, at the half or the full year moving forward. There are too many variables, too many imponderables to make that a valuable tool in our opinion. So we won't be giving that guidance moving forward.

The next question is also from Mr. Robert Peterson -- sorry, the next question is from Mr. [indiscernible]. What is the impact if a class action is taken against the company? What will the company do if action is taken?

We don't know much about the class action other than what's been stated in the public domain, which isn't a great deal. In that circumstance, it's not really appropriate for me to say much more about it at this stage other than we think whatever has been asserted so far is absolutely baseless. If a claim is broad, it will be very vigorously defended and the company's retained Herbert Smith Freehills to o assist in that regard, if required.

The next question is from Dr. David [ Handsman ]. Ms. Margaret Hall is the CEO of Seven Group Holdings Energy, a subsidiary of Seven Group Holdings Limited. How will Ms. Hall deal with the potential or actual conflicts of interest as a Director of Beach Energy? For example, by Seven Group Holdings Energy and Beach Energy could be in competition for some oil and gas assets.

When Ryan Stokes came on to our Board 5 years ago, both Seven Group Holdings and Beach recognized the potential for conflict given Seven Group Holdings Energy division. We agreed back then a series of protocols and procedures that protect confidential information of Beach Energy and also deal with conflicts of interest should they arise. And we adhere to those protocols through -- in that 5-year period. Margaret is no different. She is subject to those same protocols and conflicts will be dealt with in accordance with the rules that we set out 5 years ago and have stuck to ever since.

We have a number of audio questions. The first is from Mr. [ Damian Cole ] and it's in relation to workforce job security. [ Damian ], please go ahead.

My name is [ Damian Cole ] of our own country. I spent most of my 20s work in the gas industry in Western Australia, both in refineries and offshore and pipeline barges. Coming to terms with the disruptive impact of the gas industry was having an [indiscernible] by transitioning towards a career, which ensure that was making a positive difference to our environment and communities. And I now look Surfrider Foundation as the National Campaign Director. As you've mentioned today, Beach Energy has made clear that climate change is one of the globe's biggest threats and understand the obligation for our society to transition to a low-carbon future. In order for this to happen, the IPCC report has stated that we must stop all new fossil fuel projects immediately while phasing out current fossil fuel reliance. This will lead to Beach Energy having the responsibility to also transition their workforce to more environmentally responsible careers. But my question is what plans do Beach Energy have to transition its workers to long-term meaningful jobs to ensure that the livelihoods of its workforce is not jeopardized as you make the economically, morally and, most importantly, environmentally responsible or transition away from gas?

[ Damian ], thanks for your question. I think the way the IEA has described the net 0 pathway, it is just one possible scenario that's been modeled and Dr. [ Faith Baral ], the Executive Director acknowledges that it won't be the pathway. The IEA also acknowledges, as Dr. [ Baral ] said recently that maintaining energy security is vital, and we see that as part of the role here at Beach Energy to avoid the spikes that you've seen in Europe and China in very recent months. We think our people are doing meaningful work. We think they are supplying energy to society in a way that has allowed society to grow tremendously in recent decades, both here and overseas, and the value of that work will continue. In terms of transitioning, we don't think those people need to transition to any other form of labor at the moment. They're doing great work. They're supplying the energy that the world needs and they should continue to do that for as long as they feel as though it's a job that they want to be in.

The next question is also an audio question, and it's from Belinda Baggs and its relation to the value of the Otway Basin. Belinda, please go ahead.

My name is Belinda Baggs, I'm cofounder of [ Surface Climate], a surfer and the model living on water on country on the Great Ocean Road. My family and I rely on healthy oceans every day. The Beach is a place of [indiscernible], laugh, cry, and experience every part of life. We live simply and enjoy a lifestyle in the way of learning about the earth and connecting to nature. This is a lifestyle I want my son to continue and pass on to his children. I'm concerned about the impacts of industrializing a wild ocean and unlocking more fossil fuels. What will be the impact on the local marine environment if more exploration continues in the offshore Otway Basin? And are the threats guaranteed not to occur? And how do you justify these risks?

So we don't think that there will be any material threat to the marine environment in the Otway Basin as we continue our program there. Everything we do there is very carefully monitored. It's very heavily regulated. We report in relation to what we're doing on an ongoing basis. And at the moment, we don't think there's any material demonstrable effect on the marine environment and we don't think there will be in the future, as we continue our program there in accordance with the regulatory regime that's in place.

The next question is also an audio question. It's from [ Line Harland ] and it's in relation to sustainability. [ Line ], please go ahead.

Hi. My name is [ Line Harlan ]. I'm a young person and Environmental educator. I'm passing on my knowledge to the next generation. [indiscernible] are no stranger to the positive and negative impacts of offshore gas and oil drilling. As an educator, I work closely with the next generation, all of whom are anxious for what the future holds for them, particularly in regards to climate change and having a livable future. I wish to pass this cause on to the next generation in the same or better condition. This being the definition of sustainability. For a company that practice sustainable practices, helping you guarantee sustainability while continuing to open and explore new acreages or is sustainability a term you use to greenwash your practices?

I think -- [ Linley ], thanks for the question. If you read our sustainability report, we do take sustainability seriously right across all of our operations. Whilst we do think that the products that we produced are necessary to supply society with the energy that it still needs, we accept that we need to do that in a sustainable manner. And that's why the program that's set out in our sustainability report in relation to 25 by 25 is being undertaken. It's also why we've committed tens of millions of shareholders' money to the CCS project in Moomba with the joint venture operator Santos. So we take it very seriously. We continue our work and we intend to continue to deliver gas to the market in a sustainable way.

The next question is also an audio question. It comes from Heath Joske and its in relation to Fisheries. Heath, please go ahead.

Good day. My name is Heath Joske from Streaky Bay in South Australia, and I have worked in the prawn industry for the best part of a decade and was heavily involved in the flight for the Bauer campaigning against Equinor's plans to drill for oil in the Great Australian port. I'd much rather be fishing or surfing than here asking another company to abandon their reckless plans to blast the ocean with seismic testing again. I'm aware of multiple crawfishing industries that have now disappeared after seismic testing took place in the waters around their fishery. We have seen multiple coincidences of whales washing ashore after the same blast. We know that it is horrifically damaging to Plankton, the beginning of life in our oceans, and it's no surprise considering sonar communications are vital to so many sea creatures. Fishing commercially and recreationally is a job in past time that runs generations deep throughout Southern Australia, not to mention the tens of thousands of years, it helps sustain our indigenous people. How can you justify blasting the ocean with seismic testing, potentially decimating fisheries and marine life as a whole for a resource that is being phased out and we may never even have to access? It seems you value gas more than food or fisheries.

Heath, we don't value gas over and above food and fisheries. The scientific data doesn't suggest that seismic has an ongoing and lasting impact in the areas where we're undertaking seismic. I can tell you this is a topic that's dear to my heart. I have very significant industry positions in the seafood sector myself. I'm also Chairman of an industry body here that controls the Spencer Gulf and West Coast Prawn fishery. So it's at front of mind for me all the time. But I think the 2 industries can coexist quite easily in a sustainable way, and the record show that, that's what we've done.

Next question is also an audio question is from Kate Gazzard in relation to investor expectations. Kate, please go ahead.

Hello. My name is Kate Gazzard. I'm a counselor in the Surf Coast Shire council, and I'm also a pediatric doctor working at the Royal Children's Hospital. I live in Jan Juc [indiscernible] country, and I'm so grateful to the traditional cost audience of this land who protected this country for 60,000 years. Climate change is real and it's here affecting those who've contributed to it the least, particularly those in the Torquay islands where sea levels are rising, but also all Australians are affected by bushfires, drought wild weather events, heat waves and pollution. As a pediatric doctor, I'm very concerned about the health risks posed by climate change. And as the children, adolescents and young people will climate adjust to ensure a safe future for the planet that they're going to inherit. My question to Beach Energy is if you continue to produce and explore for new fossil fuels, including gas, how you mitigate the health impacts of climate change, which are known to cause 5 million deaths annually worldwide.

Okay. We'll continue to do what we're doing today, and that is taking the issue of climate change very seriously and looking to reduce our emissions as we continue through the development of our projects. We're doing that by a series of things in relation to our operations, whether it's Flare inventing management whether it's leak detection and repair programs, changing our CO2 membranes at Beharra Springs in Western Australia. All of those projects matter, all of them reduce our carbon footprint. And as Morné mentioned, the CCS project in Moomba will very, very materially reduce our carbon footprint. Does that mean that we're finished? No, it doesn't. There's still more work for us to be done, but that is how we intend to move forward to develop our assets in a sustainable way.

The next question is also an audio question. It's from [ Lisa Dipole ] and its relation to financial risks. Lisa, please go ahead.

Thank you for the opportunity. I'm speaking to you from [indiscernible] country. I'm a member of OCEAN, Otway Climate Emergency Action Network. At the recent [ Blasco ] summer, it was widely accepted that cutting methane emissions is the fastest opportunity that we have available to us to urgently slow global warming. As a result, [ 90 ] nations have pledged to reduce methane by at least 30% by 2030. The windows for gas is quickly closing and the gas industry is banking on the unproven technology of CCS. My question to the board is this, how can Beach Energy justify spending new money on exploration and new assets that are likely to become standard in the foreseeable future. And with this in mind, what is stopping Beach Energy from diversifying their energy portfolio to include sustainable energy sources such as biofuels or geothermal energy, for example?

Lisa, nothing is stopping us from doing it other than we don't think it's in the best interest of members. I'm repeating answers to earlier questions, for which I apologize, but there is a common theme to the questions. we still see demand for our products moving forward. We accept that, that demand needs to go hand-in-hand with reducing our emissions, and that's what we're doing with the work that we've already explained.

The next question is also an audio question. It's from Josh Kirkman in relation to community consultation and reputation risk. Josh, please go ahead.

I'm Josh Kirkman, and I'm the CEO of Surfers for Climate. Beach Energy has a great name. Beach surfers certainly aren't going to forget that name quickly. We live the best part of our lives on beaches. We're certainly more and more sensitive to what happens in our oceans [indiscernible], growing certain communities that we represent is concerned about the traditional lack of transparency when it comes to community consultation from fossil fuel companies when they explore off our customers. With the upcoming annual acreage release date looming, are you able to provide transparency right now on your plans regarding the Otway Basin. And if you are intending on expanding your exploration there, can you provide us as well as countless other [ coastal ] stakeholders with clarity on how you will approach community consultation so that all of us can be very clear [ with ] you sooner about our steadfast proposition?

Josh, I can't say anything about the upcoming acreage release because I just don't know at the moment what our position is in relation to that acreage release. In terms of our program in the Otway, we continue to do what we've said we're going to do. So where there's opportunity to grow in our existing acreage, we will continue to do that where we think it makes sense for our shareholders. From the perspective of community consultation, we have a very strong relationship with the community in the Otway and in all of the basins in which we operate. It's important to us that we work with the communities in which we operate, and we don't see the Otway as any different to that in any regard. If you want further consultation with it, Josh, in relation to our operations, we are very happy to discuss that with you.

We have one more audio question and it's from Tracy Hamilton in relation to future financial investments. Tracy, please go ahead.

My name is Tracy Hamilton.

Tracy, can you please press pause on your broadcast?

Sure. My name is Tracy Hamilton. Beach is looking to significantly increase gas production in the coming years as pushing ahead with new exploration development projects. How does this company justify these plans in light of international energy agencies finding that no new oil or gas [indiscernible] in the pathway of net 0 emissions by 2050, with Australia now having joined the majority of our trading partners in committing to this goal. Is Beach reviewing its growth strategy to align with the [ i.e. ] net 0 by 2050 pathway.

We are aligned because we do have an aspiration ourselves to be net 0 by 2050. We'll also set a real near-term target of reducing our emissions by 25% by 2025 based on our 2018 baseline, which is when we acquired Lattice. And we're happy to be halfway through in terms of achieving that goal. I don't think the IEA has made a pronouncement that is to the effect that you have stated. Faith for All, as I said earlier, has said that the net 0 pathway is one model, it's one scenario. It's not a prescription about how the world is going to behave to get to net 0. The fact is at the moment that none of us know how the world will actually get to net 0. There are multiple pathways. But in the meantime, as I've said earlier, it's clear from everything that we see and everything that we look at, the demand for our products will continue. As we supply those products, we will continue to reduce our emissions and operate in a sustainable way.

The next question is a written question is from Mr. Carlo James Spinelli, but there's an amalgamated question of 3 questions around the same topic. It seems strange Matt Kay departed from Beach before the AGM so suddenly. Was he pushed? What was the urgency? And why couldn't he wait for a replacement transition?

Matt wasn't pushed. Matt tendered his resignation. We had a conversation about what was the best way to handle that. We came to an agreement, but it was best to deal with it quickly and to make a move straight away. On that basis, we have installed Morné, who you've heard from this morning as our acting Chief Executive Officer, who we have every confidence in. And again, I can only sing Matt's praises. He's been a fantastic CEO and Managing Director for Beach Energy. He's done a tremendous job for which we're very, very grateful, and we wish him the very, very best. We should be celebrating that success.

The next question is also from Mr. Carlo James [ Spinelli ]. Are the Board actively looking to sell the company?

Well, we're probably for sale every day, given that we're ASX-listed, but we are not in the market actively trying to sell the company as a block, if that's the question. You may be referencing an article that was raised in the Australian yesterday about the intent of Seven Group Holdings. I can tell you that Seven Group Holdings have confirmed that, that article is baseless. And I also note that Seven Group did acquire another 1.5% of the register last financial year.

The next question is from Aslan Proprietary Limited. Last quarter's realized gas price of $7.50 per gigajoule remains close to the previous 12 months realized gas price. Is this the level of realized gas price that Beach Energy will be receiving for FY '22. Are the recent price increases from Lattice gas contracts already fully reflected on last quarter's realized gas price of around $7.50 per gigajoule.

The realized gas price did go up about 5%. That average price does reflect for the period of that production, the outcome of those 2 price reviews. We can't forecast gas price going forward for commercial reasons, and we can't disclose the actual contents of the contracts in relation to those GSAs.

The next question is from Mrs. Sharon Lee [ Rob ]. Did Beach identify the problems with the downgrades of the Western Flank? And what steps have you taken to ensure this never happens again? What are the lessons learned?

I think we've got to put the Western Flank downgrade in context. Those reserves are 2P reserves. They do move around. It's not uncommon in terms of the risks that the industry faces, we do disclose in all of our material that the 2P reserves are subject to movement, and they're subject to movement as we gather more and more information about the fields in which we're operating. So when those reserves were signed off at FY '20 on the available information, they are in accordance with the PRMS guidelines and signed off by our auditor. As we got more information, it was obvious that things were moving, and we needed to deal with it, and we did, and we informed the market on the 30th of April. In terms of the broader question, ensuring this never happens again, reserves will continue to move around. That is just the very nature of the industry and the very nature of 2P reserves. We are confident in the 339 million barrels of oil equivalent that we've signed off on at 30 June 2021. And there were processes undertaken just to provide the board with more assurance around that after we saw the decline on the Western Flank.

The next question is also from Sharon Lee [ Robell ]. Apart from CCS, will Beach pursue other projects that meet the current ESG requirements?

We may or we may not. We're very careful about committing our shareholders' capital. We think that the CCS project is certainly in the best interest of members, and that's why we've committed. We think the other projects that we're committing capital, too, under the 25 by 25 program are in our shareholders' best interest as well. If future technologies and future projects meet that test, then we'll invest.

The next question is from the Australian Shareholders' Association. My name is James [ Han ], and I represent 1.7 million proxy shares on behalf of the Australian Shareholders' Association. Thank you for meeting with us and discussing issues of interest to us. Beach has had a difficult year, which includes the downgrade of Western Flank reserves, a drop in profit and recently the resignation of the Managing Director. However, Mr. Chairman, you have outlined some positive initiatives for the future. What is the simple time line for the company's turnaround and what does it involve?

Thanks, James. Look, it's really, as Morné articulated earlier, you should expect to see Geographe Gas online in this financial year. You should expect to see Thylacine and Enterprise Gas online in FY '23. You should expect to see Waitsia gas online in FY '24 at the back end of calendar 2023. All of those projects go towards building that FY '24 production target that we've mentioned of 28 million barrels of oil equivalent. There is the potential for more. On top of that, we will start our exploration program for oil in the Western Flank in February, I think it is, next calendar year. We're not banking on any results there, but there is the potential there for upside as well. So through those programs, over that time line, James, we expect improvement in our performance.

The next question is also from the Australian Shareholders' Association. In relation to the election of Margaret Hall -- James [ Han ] from the Australian Shareholders' Association, we support Ms. Hall's nomination as she appears to be a well-qualified candidate. Could Ms. Hall please tell us what she sees as the most important issue for Beach Energy right now?

So Margaret is aligned with the rest of us on the Board. The most important issues for us at the moment, how to continue safe operations, 4 million hours without a lost time injury and a TRIFR of 2.1, quite amazing results, of which we're very proud, and we want to continue on that pathway. Secondly, we need to deliver on the projects that I've just mentioned in terms of offshore Otway and Perth Basin. They are the things that are front of mind for us. And then lastly, but by no means least, we need to start a process in terms of recruiting a new Chief Executive Officer. That is important that we get the right person but that is going to take us some time. But they are the things that are front of mind for us.

. The next question is from Aaron Proprietary Limited and also from Mr. Fredrik Raymond [ Willard ]. What is your level of confidence that the CCS technology to be applied at Moomba is proven? And what is the basis for this level of confidence?

We are confident as is our joint venture operator Santos. CCS is not that new. It has been going on globally for quite some time. The key to it for us at Moomba is that we've got a steady stream of CO2 right there at the plant, and we are disposing of it in reservoirs right next door to the plant. And we're disposing of it in reservoirs that are depleted and have the appropriate sales and caps in place to make sure that, that CO2 is going to stay where we're putting it. So on that basis, we have confidence in the technology and the project. If we didn't, we wouldn't have committed shareholders' capital.

The next question is from Mr. Scott Fielding. In terms of ESG, do you see LNG being the key focus? Or will you look to strengthen elsewhere, i.e., hydrogen?

Look, LNG will be an important part of our portfolio in that period between 2023 and 2028. Maybe there is potential for us to enter the LNG market beyond that. Time will tell. In relation to hydrogen, certainly, our joint venture operator Santos is looking at blue hydrogen in the Cooper. We will stay hand in glove with Santos. If blue hydrogen is to be produced, it's going to need CCS, which is the first phase in any sort of blue hydrogen in the basin. So there's potential there, but we don't want to make any commitments at the moment. It's early days for hydrogen, both globally and in this country. But you can -- rest assured, we've got a very close eye on developments and continuing to monitor it. If there's an opportunity for the company and our shareholders, we'll invest.

Next question is from Mr. [ Graham ] Wallace Ray around material cash flow in 2024. What numbers are you thinking and what price assumptions are around that?

I'm not going to give you a cash flow forecast for 2024. The rest of the team will shoot me if I do that, but they will be material numbers. In terms of the price assumptions, I think if you look at our annual report, you'll see that in FY '22, our oil price assumption is [ 70-50 ], grading down to $60 5 years later with a ForEx assumption at $0.78, down to $0.75 flat next year and thereafter. But we do think when we hit that production target in FY '24, there will be very material cash flows that will give us flexibility in terms of capital management moving forward.

The next question is from Mr. [ Dean ] Lambert. [indiscernible] Metals has declared an intention to divert 10% of profits to development of green energy alternatives. Will Beach consider following this example to help with reduction or offset of emissions?

We're not going to make a statement about dedicating a certain percentage of our profits along those lines or committed to anything else for that matter. But I only repeat what I've said earlier. We do take climate change seriously. We accept that we need to do with our emissions, and we are dealing with it. As time unfolds and further capital needs to be deployed to develop our reserves in a sustainable way, that capital will be committed.

The next question is from Mr. Scott Fielding. Where do you see Beach Energy once the uptake of EVs, electric vehicles, gains momentum? Do you see the demand for gas being impacted by this? And what measures do you have in place to ensure the company isn't adversely affected?

I think the EV take-up is going to be relatively slow in this country. And even globally, it's probably not moving at the pace that people initially expected. We don't see it as a material impact on us. If I go back to the forecast that I was talking to you earlier about in terms of demand for our products, most of those forecasts still demand -- still see demand for oil as being strong in coming years even with the EV uptake. In terms of our gas, we don't think there's a negative. EVs are being charged by electricity. There's a gas role to be played in terms of provision of that electricity so that there's dispatchable power available. So we don't see that there's a negative impact on the portfolio moving forward just through that take-up of EVs.

This is the final question, it's from Mr. Joseph Jordan McCarthy. Are you specifically looking externally for a new CEO? Or would you consider an internal candidate?

[ Joseph ], we'll look everywhere, including internally. Externally, I don't discount Morné at all in that process. It's just that Morné has not had time to consider his position moving forward, and we need to be fair to Morné to allow him to do that. We need to get the process started. We will look extensively. It will take us some time, but the best man or woman, that's available, will win the role whether they're here now or whether they're somewhere else at the moment.

Thank you, Chair, there are no further questions.

Thank you, Chris. If there aren't any more, we'll move on. The company has received 914,561,573 proxies, representing 40.09% of valid securities voted. As we move through each resolution today, the proxies received will be displayed on the screen. Proxies have been reviewed by our share registry, Computershare Investor Services Proprietary Limited. And I note that I've cast undirected proxy votes given to me as Chairman in favor of all resolutions today. The first item of business is the receipt and consideration of the financial report, the director's report and the auditor's report of the company and the group for the financial year ended 30 June 2021. There's no requirement to approve the financial statements, so I won't be putting a resolution to the meeting. So we'll move on to the formal resolutions. The first resolution to be but is a nonbinding ordinary resolution in respect to the remuneration report for the financial year ending 30 June 2021. The proxy results are shown on the screen. I note that there's a voting exclusion in respect of this resolution as was set out in the notice of meeting. I'll now put the resolution that for the purposes of Section 250 are 2 of the Corporations Act, the remuneration report for the financial year ended 30 June 2021, as set out in Beach's 2021 annual report be adopted. Remember, the polls are open, ladies and gentlemen. So please vote whenever it's convenient. The second resolution is an ordinary resolution regarding the election of Ms. Hall as a director. Be sure to close 6.1M4 ] of the Constitution, Seven Group Holdings Limited has provided Beach a notice pursuant to clause [ 6.10 ] of the constitution, nominating Ms. Margaret Hall, who is eligible for election and has consented to act. Ms. Halls biography is set out in the notice of meeting. The directors have considered the suitability of Margaret having regard to our skills and experience as a nominee to the Board and determined to recommend the appointment to shareholders. Margaret brings 28 years' experience as a reservoir engineer and executive in the industry, and she will be a strong addition to our Board. The proxies for the resolution are shown on the screen. I'll now put the resolution that Margaret Hall, be sure to close [ 6.1 ] of the constitution and who being eligible and having consented to act -- be elected as a Director of Beach. That's bringing us towards the end of formalities, ladies and gentlemen. In a moment, I'll close the online voting system. Please remember to cast your votes by using the voting icon that looks like a bar graph on your device screen or navigation bar. Once you've selected this, the resolutions will appear on your screen and you can select a voting option. I will now pause for a little while to allow you time to finalize your votes. [Voting]

Ladies and gentlemen, I now formally close the polls. So hopefully, everybody has got their vote in. The final poll results will be released to the ASX and posted on the company's website when they're available later this afternoon. Before I formally close the meeting, a tradition of AGMs has been to conduct a shareholder raffle for those in attendance, whilst that's obviously not possible today as we did last year, we'll still be conducting a raffle draw after the AGM today. Computershare will send us a list of shareholders who attended today's meeting and we'll draw the winners from that list. You've received some fine wine from the Kaurna [indiscernible] region in the southeast of South Australia, and the winners will be notified later this week. So good luck. On behalf of the Board, thanks to everybody participating in the meeting today. We do appreciate you making the effort and taking the time. And with that, ladies and gentlemen, I'll formally close the meeting. Thank you.