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

Thank you for standing by, and welcome to the Beach Energy Limited strategic review briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Brett Woods, Managing Director and Chief Executive Officer. Please go ahead.

Thank you very much. Morning all. Thanks, everyone, for joining us this morning to go through our strategic review. I am also joined by Anne-Marie, our CFO; and Derek, our Head of Investor Relations. I'll be doing the majority of the speaking today, and they'll be available for questions at the end of the session. We jump forward to -- I'll let everyone read the disclaimer at their leisure. I think the challenges for Beach over recent years have been well documented. For me it was clear, when I joined in early February, that a full reset of Beach's operating model and strategy was required. The strategic review is our first step in addressing the challenges, as we rebuild trust with the market and earn that right to grow. Today's presentation aims to articulate our refresh strategy and operating model, update on which assets are core and which are non-core certainly with the organic growth projects, demonstrate progress to date on cost reductions and new targets we're working towards, combine our disciplined approach to inorganic growth. We also aim to rebase expectations today and that includes our initial guide on where production and capital expenditure are tracking in 2025, given this is before full year in August, and our likely revisions to our 2030 reserves position -- 2024, sorry, reserves position. I think that is a critical part of our journey today. Moving to the next slide, just a quick snapshot of what we're talking through. We reviewed our purpose and vision, and that can be observed on this slide. Critical, our financial targets, the way we're going to run the business, focusing on our core metrics including our guidance to $450 million worth of sustaining capital expenditure and facilitating our disciplined operating model, which is very much in-line to what Kevin Gallagher originally introduced at Santos, which is making sure that we are free cash flow breakeven positive at less than $30 a barrel of oil. We'll make sure we do this within aligned to our sustainable operating principles, and delivering that against our Climate Transition Action Plan. Our key value drivers are really critical for how we're getting here. So despite today's reset expectations, which I think were overdue, our near-term production and reserves, the fundamentals for Beach, our asset portfolio and growth are compelling; as well as catalyst outlined in this slide, it is worth remembering the macro backed up against which we operate, continues to strengthen. The world needs our products for decades to come, and I would like to reflect on the recent future gas strategy that our current governments put out, I guess, again, indicating the importance of gas well past 2050. Though this recognition of gas has been accelerated through the recent conversations I've had throughout South Australian Victorian governments, and fortunately for Beach, we are uniquely positioned to harness the ongoing gas demand for gas and liquids in both the East Coast and West Coast markets. The Slide 7 reflects our purpose and vision. Quite simply, I want to drive Beach to become Australia's leading domestic energy company. And we'll do that through the lens of delivering leading shareholder returns through the sustainable supply of energy. I've used energy in this context to really reflect that we're not just a oil and gas producer, but the future I see great opportunities to do things in storage as well as potentially through gas peaking across the East Coast of Australia, given our fantastically located assets in Victorian and Western Australian markets where as per the aim and forecasts, the desperate requirement for gas peaking is ever present. Moving forward, our strategic horizons are really focused on several key points. Strategic horizon, sorry. Our base is profitable and resilient. We want to have low cost, high margin assets with a very strong balance sheet. We are refreshing our exploration inventory, looking at things like the Western plants and ensuring that we have durable prospects in our inventory for the 2026 financial year. And we'll do this through the lens of our Climate Transition Action Plan. This really is the foundation for us, earning the right to grow. Growth, we want to refresh our portfolio and pivot to longer life assets. Our asset portfolio at the moment is full of assets that are high value, but short life. So that pivot, I think, is really important. We'll be looking through strategic acquisitions, but doing so in a very disciplined way. We want to maintain our diversification across our domestic gas, liquids, and LNG portfolios, and as I mentioned before, looking at our gas storage options. And the extension is with things like gas storage is that push to potentially move into gas peaking. We've done quite some considerable work about the value of that, and though I don't have significant information to update today, it's certainly something that we see adds a lot of value for our business. Our operating principles are outlined here in this slide. Strictly, we're going to move to a free cash flow breakeven oil price of less than $30 a barrel. We've our target of reducing our field operating costs to less than $11 a barrel and maintaining our outstanding CapEx to around that $450 million per annum. This connects nicely to our capital management framework, maintaining our strong balance sheet with gearing, targeting at less than 15% and with the ability to flex-up to 25% through the cycle as required. Our disciplined growth means that we'll be using and what we're outlining further in the pack, our rates of return that are required to deliver investments for our portfolio, and we maintain our shareholder return focus, which is 40% to 50% of pre-growth free cash flow to fully franked dividends. This is really important for us as we rebuild trust, we pivot to grow in a disciplined environment and make sure that we deliver strong returns to our shareholders. Moving on to Organizationally, we made a strong reset. We've recently introduced Glenn Watt. Glenn Watt has just joined us from his time at Santos, where he has been Vice President of the onshore business across Queensland. Glenn is a very experienced oil and gas professional that is well versed in delivering low-cost discipline operations and I am really keen to see Glenn join us in the not-too-soon future. We've undertaken a significant refresh, and as you can see, Bill Ovenden has joined us as the EVP Exploration & Subsurface. Bill's fantastic experience across the offshore Otway, the Cooper Basin in Western Australia can be very valuable to me in the business to make sure that we can unlock future value and deliver exploration opportunities with the highest integrity. Bill also will be accountable for maintaining our reserves position moving forward. We do have some gaps still, now, executive leadership ranks, many of the recruitment processes are well underway, and I look forward to updating the market as they are landed. So just a quick update on the market dynamics. As you can see, the market is effectively unchanged for us. We see structural supply deficit persistent and ongoing and growing. The outlooks for the West and East Coast market support our focus on our core hubs, and the supply deficits for global liquids provide strong support for oil pricing moving forward, which in turn provides opportunity for more oil linked price exposure to enhance our margins. The interesting thing we've seen across the East Coast over this last weekend, as it gets colder, the market has shifted to spot pricing in excess of $20. So the opportunity across the East Coast is exciting for Beach who have a large position of 50 terajoules a day of uncontracted gas becoming available in the middle of 2025 calendar year. Our core hubs, East and West Coast are the locations of those core hubs with the Cooper Basin and the Otway Basin assets reflecting connection to the East Coast market, and obviously, our assets through the Perth Basin connecting through to that base through there. Our acreage is not only connected to those markets in terms of gas, but also through the electrical networks, through particularly our Otway Basin assets, which is really exciting with the optionality for storage and the optionality for future gas peaking and other asset-based adjacencies. It was great to bring Enterprise online this week, and we have seen a significant step-up in our Otway sales volumes. In fact, over the weekend, we were producing in the order of 194 terajoules a day out of the Otway. And over the last 2 days, we've been doing peak rate testing for Enterprise as we bet that asset down. That rate will settle down over the next few days as we do some different rate testing across that assets. But I want to direct people to the fact that we'll be able to, looking forward, deliver a guidance of 150 terajoules a day for the first half of FY '25 as our guidance for take-or-pay out of the Otway Basin assets. We then come to set take-or-pay volumes later this year with the addition of our last 2 Thylacine wells which are coming online in next several months. We are getting those place -- we'll be well placed to set our take-or-pay levels for the coming second half of FY '25. Exciting as well is our opportunities. One of the things that I've been very much focused on is ensuring that we have scale in our portfolio. I have been concerned when I initially joined Beach that we were heading on a treadmill capital type trajectory. And so we're looking at opportunities such as Hercules and Mavis late 2025, early 2026, campaign with our offshore rig to execute prospects well in excess of 100 Bcf each. Those opportunities at that scale give significant value to deliver great rates of return and additional volumes of gas into their desperately short East Coast gas market. With regards to assets such as La Bella, you don't see that on this page, we've elected not to move forward with La Bella, that doesn't deliver us the rates of return that we think are sustainable for our business. So we're very much focusing on executing things like Hercules that has scale and that gives us the ability to tie back to Artisan to deliver more gas into that East Coast market. We skip onto the West Coast. Critically, we're all waiting, I certainly am, for the startup of Waitsia gas plant. A critical next milestone will be the introduction to gas to the Waitsia facility, and that is timed for end of July this year. The market has noticed that there's been several dates that have been initiated for the ultimate startup of the Waitsia plant. Over the last few months, the dates that Clough has indicated have shifted closer to our expectation. So I can't buy it any sooner than early 2025 as our expected ramp-up sets, the headroom that we had in our production startup has been slightly eroded by Clough over the last few months, and they're now trending towards late this calendar year per their expectation. So our headroom that we gave ourselves for any emergent scope has been shrunk effectively, but we still feel confident that early 2025 is the appropriate time to ramp -- to start the ramp-up. We're also forecasting a 3 month to 4-month ramp-up period, which is indicated you can see through later in the pack, the uncertainty associated with FY '25 production, the criticality of getting Waitsia started up, and the criticality of doing that ramp up quickly is really important to our FY '25 production. We've also had significant success with our recent well at Redback Deep, that floated around 53 million $0.01 a cubic foot a day, which is an excellent outcome. And I think critically, what it has done is it's kind of rebased my expectation a little bit. We see a trend heading north and south of Redback Deep that has very similar life opportunities to that success. So we're looking at -- we're excited about the opportunity there. However, you can see in features such as Trigg Northwest that we have that well flow, and it's delivered a non-commercial quantity of gas. So we're looking at the total portfolio, making sure that we time our execution across the broad Perth Basin to develop the reserves as appropriate. In terms of Waitsia here, we have our final stages of our development drillings for Waitsia Stage 2 coming up over the next few years. They represent the last phase of our growth capital expenditure for the Waitsia infrastructure. And moving forward, after Phase 2's drilling, we'll be describing our Waitsia drilling, our Perth Basin drilling in sustaining capital for our ongoing production. Moving to the next slide, we also have highlighted our non-core asset portfolio. As you can see, New Zealand, the assets at the Bass Basin, which we've recently taken impairment of and our SA Otway position currently sit in our non-core asset base. So what does that mean? With assets such as New Zealand, which still generate strong free cash flow, we'll be either looking to continue to run them down to value, or alternatively, looking for opportunities to divest assets such as that. But as always, safety takes precedence. We'll be focusing on making sure we've got a strong, small operating team looking at those and delivering value through throughout the cycle. The opportunities within the Bass assets and the SA Otway Basin do have great opportunities for storage and gas peaking. So we could be looking at repurposing some of those assets. So what non-core assets mean for us? Its either run for value or divest or alternatively seek to repurpose those to deliver additional value in our portfolio. And as we know, the prices we're currently seeing in Victoria, a storage asset adjacent to our field is going to become incredibly important and delivers us higher rates of return when the market needs that gas the most. Here is a slide that seeks to represent some of the cost out and capital expenditure reductions we've been able to facilitate across our business over the last 4 months. Starting at the top, which is our labor and associated costs. So far, we've delivered around 23% in headcount reduction, of about 30% headcount reduction target by the end of the year. That has improved our bottom line by $50 million. The target as we head to the end of the year, delivering that 30% headcount reduction delivers between $65 million and $75 million a year of value. The range representing things such as the associated costs that those people bring with us, i.e., things such as travel and other IT infrastructure support. Those numbers can't be added to the next 2 capital pools, the field operating costs and sustaining capital. Much of the delivered and target numbers there are blended within those numbers. So when at the start of the presentation, I highlighted $150 million worth of targeted savings, that represents the $100 million sustaining capital expenditure plus the $50 million worth of field operating cost expenditure. What has been delivered so far is $35 million of field operating cost improvement, and we're on track and we've deferred as well as delivered sustaining capital expenditure improvements so far this year. Critically for us, we need to deliver more. We are focused on delivering more. We have to convert some of the deferments into sustaining capital expenditure reductions to make them structurally fit for the future. And that is very much the focus of the team at the moment. I think one of the key things that you'll reflect on, on the right-hand side is, particularly in terms of our sustaining capital expenditure is we are dominated by non-operated CapEx expenditure. I've been working very closely with Santos, particularly over the last few months to work on our cost, our initiatives across the joint venture. I don't know that Kevin will be looking forward to updating everyone about that in their results later this year. But I'm very encouraged what I'm seeing through the work that [ Brett Darley ] and his team is doing because we need to get those improved. Since COVID, those costs have gone up and they reflect our biggest next challenge to reducing costs across our broader portfolio. If we go to the next slide, so in terms of our operating cost reduction, you can see that's a little bit of a journey between where we are today at around $17 a barrel of oil equivalent to our guidance for 2025 at $14 a barrel of oil equivalent. And then finally, our target in FY '26 of $11 a barrel. And why there's a journey there, it's really a function of the timing of Waitsia's start-up and the impact of those low-cost barrels coming into our portfolio. Delivering these cost savings has really been a function of our organizational structure efficiencies, the cost we've been able to deliver through labor, working with our service providers to lower their operating costs and deliver better lower cost services. And obviously, our working with our joint venture participants, including Santos and Mitsui to help drive those costs lower and lower. We are targeting to be clear, 30% reduction in our unit field operating costs to $11 for FY '26. If we look through the sustaining capital expenditure reduction, and we'll start with where we are today. Currently, we're trending towards the top end of our current guidance, which has been between AUD 90 billion and AUD 1 billion. Our growth capital expenditure represents $375 million to $425 million in that, and our sustaining capital expenditure represents between the $525 million and $575 million. Moving forward, we see -- we're on track to deliver a 20% reduction of our sustaining capital expenditure, we're guiding for FY '25 between $425 million and $475 million. So what is in that sustaining capital expenditure, I think it's important to highlight. And what can be seen through here is the large dominance that the Cooper Basin joint venture has on those numbers. So $230 million is Beach's net share of operating that 4 to 5 rigs across the Cooper Basin. And approximately 50% of the $150 million sustained business capital is also related to the Cooper Basin joint venture costs. So as you can see, working closely with Santos, working closely with Kevin and his team can deliver us significant improvements in our sustaining capital expenditure and I am looking very much forward to working with them on delivering that. It's obviously where we're operating, we've been able to deliver fantastic outcomes, and we have to become better at working much more collaboratively with our joint ventures to deliver that -- those cost savings across all our assets. What I also have in that pool is the assumption in '26 that we'll be doing around $30 million of Western Flank drilling. That will start late in Q4 FY 2025. Why? I think one of the things that I'm pleased about and really is reflect positively about the attitude that I'm seeing within the business is our focus on driving our -- lowering of our free cash flow breakeven in the business. We're currently running at around USD 54 a barrel, which is, I think, pretty much speaks to the heart of the challenges that we've had to address since I started at Beach earlier this year. We are guiding towards FY '25 being at around the $30 a barrel free cash flow breakeven, which is a fantastic outcome. I'm really proud of how we've been out to get there. We also highlight our free cash flow sensitivity of around $75 million for every $10 above that USD 30 a barrel. And I also want to highlight that, that steps up significantly when the low-cost Waitsia oil, sorry, production comes online early next calendar year. Those steps, we've also kind of highlight our mix between oil links pre-Waitsia and post-Waitsia. So we see a very strong buildup in our oil and value proposition associated with our business. So Beach is really well positioned to take advantage of that global shortage in terms of oil pricing against our current contract books. What I've also tried to do is indicate how we're going to manage our business in terms of marketing our gas and protecting our free cash flow breakeven. So the schematic on the left is a diagrammatical version of how we're going to manage our contracting book. And at the moment, we do have a large proportion of our East Coast volumes in particular that are on long-term contracts, but they start to roll off. So if I explain from the diagram on the left, what represents our free cash flow breakeven is obviously our OpEx, our tariffs and tolls, our corporate costs, our sustaining capital costs, and all our taxes and royalties. That represents our free cash flow breakeven across our business. Above that, as we've indicated earlier, is our capital that we can deliver as dividends and also to reinvest in growth. So what we're trying to -- what I'm trying to do is steer the business into making sure that it has protection to deliver against its free cash flow breakeven, i.e., having fixed price contracts or even potential hedging to make sure that we balance that risk out. But more importantly, is to expose more and more of our portfolio to that short-term spot liquid market exposure. The bottom right-hand chart kind of reflects the Beach's East Coast gas volumes in terms of its contracted position. And as you can see, in FY '25, we are still heavily contracted. But at the start of early -- at the start of FY '26, we have a large volume around 50 terajoules a day that becomes uncontracted out of the Beach production in the Cooper Basin. And we are very -- well, I'm very excited about utilizing those volumes to chase good pricing and good market support across the East Coast of Australia. And then the light blue colors there represent the repricing points with our existing contracts. So progressively, you see more and more exposure to spot and short-term pricing associated with our East Coast gas volumes, which I think is a fantastic opportunity and value upside for Beach that's probably not widely understood within the market at this point. So moving forward, positioning for sustainable growth. Our Climate Transition Action Plan was released in April this year. It sets out our emissions reduction targets which aligns in terms of the Paris Agreement. Beach has already made significant progress towards our decarbonization targets. And relative to our peers, we've already invested in projects such as the Moomba CCS Project, which really means that we are punching well above our weight in terms of decarbonization. CCS is a critical enabler for low emissions energy supply and our first injection is getting much closer. We are expecting that in the second half of calendar year 2025. We -- the investment in Moomba CCS brand effectively delivers our emissions reductions targets for 2030. And all other investments in this space needs to compete with other investment opportunities down -- across our portfolio. Moving to health and safety. We still have a personal safety performance number that is too high. We're really focusing on driving that down. And I'm pleased to announce that over this last 6 months, we haven't had any reportable injuries within our business. We've also had zero Tier 1 and two Tier 2 process safety events. And I think one of the questions that you may ask through a period of such significant organizational change is what I've inflicted upon the business is, are you exposing our organization to any more risk. And I'm really pleased to say that the businesses stand up, the quality of our people across our field operations is first class, and I'm very, very pleased to see that in the first half of this year, such excellent safety and operation performance. Moving forward, we need to have this as top of mind. We want to make sure that we have that strong safety culture maintained through the organization, and it's certainly a big priority of mine. In terms of our growth outlook, what I've done is try to articulate some of the key catalysts across our East Coast and West Coast positions. Obviously, we've now completed the Enterprise arrangement. Thylacine West comes on in the next 3 to 4 months, which will be very exciting for us, is another way to deliver more volumes to the East Coast market. We also get to reset our take-or-pay for second half of FY '25 towards the end of this year, with those higher volumes coming out of the Thylacine wells and Enterprise puts us in very good shape for that. And we're currently planning utilization of our rig slots associated with the Equinox rig facility for late FY '25, early in FY '26. Across the Cooper Basin, we are in the middle, and Bill is working very hard on this, refreshing our drilling inventory across the Western Flank. Looking at some of our existing players, but moreover chasing new players that give us more expansion to liquids moving forward. It's really important for us as we see decline across our current Western Flank production. We need to make sure that we have quality opportunities to backfill. In addition, as Santos mentioned in their recent investor updates, we're seeing good results coming out of play types such as the Granite Wash. We're looking forward to operate as continued focus on costs and continued focus on drilling those play types to delivering great rates of return and higher volumes. Our cost optimization project is really critical for value for both Beach and for Santos across the broader Cooper basin. With regard to the Perth Basin, we're also refreshing our drilling inventory, particularly through Redback Deep, that has really excited the exploration team to chase those opportunities down that central trend. We're also looking at our development work associated with the discoveries that we've made over the last few years, making sure that we get those tied back in a timely manner and with another drilling campaign potentially coming in FY '26. As mentioned earlier, our targets for first gas remains in early calendar year of 2025, and we're suggesting that our plant production ramp up being that 3 months to 4 months. Debottlenecking will come, but it's not until we have our peak rate test across the Waitsia plant, but I can give guidance to what I think that plant can debottleneck to without further capital investment and potentially with further capital investment. I think one of the key opportunities for us in the Perth Basin is that conversation that I've had before about collaboration. Collaboration is really important. And I think that it makes most sense for all parties that we utilize the installed infrastructure there today rather than continuing to invest in infrastructure across the broader basin. Everything in our portfolio must meet our disciplined investment hurdles, which are categorized by this slide. We have a disciplined framework for oil, gas, and LNG. You'll note that the oil has a higher rate of return. That really reflects their short life. So make sure that we can deliver value to keep investing and keep growing value through that. Those opportunities deliver very, very strong fast payback and important barrels. So very keen to see that refresh portfolio coming up in the Western Flank. Across our broader gas portfolio, we're utilizing a 12% rate of return is our focus. We're trying to pivot as well to the long-life stable production assets to give us less flex up and down and give us much more predictability in terms of our annual production across our business. And finally, we talk about value chain. And for us, really, this is speaking to our storage opportunities and potential gas peaking opportunities, the future of CCS opportunities and so on and so forth. Again, we think that an organization like ours needs to make sure that those opportunities have reached the investment principles across the remaining parts of our business. We need to make sure that across the life cycle, these opportunities are free cash flow breakeven, and we continue to improve our corporate free cash flow breakeven through any acquisitions that we may make. Just to give you a little bit more color about some of our adjacencies. Obviously, in the dark color here is kind of our core business. This is what we do. We generate oil and gas. We generate LNG, condensates and LPGs, which we're selling to the market. We have a very strong marketing and trading team and I am looking to strengthen further as we move forward. And we would like to move more into storage. We currently have storage within our Cooper Basin assets with Santos, but I see a great opportunity for us to position ourselves more wholesomely in storage across the East Coast gas market, particularly in Victoria. And that gives us the opportunity to do things like gas power generation through peaking through our existing infrastructure base. One of the things that we don't have any capability at this time, and I'm not sure it's an area that we really want to focus on ourselves is electricity marketing or that trading. We'd be looking at working with others to help facilitate that, where I have absolute confidence that I can build power-gen. We've done that many, many times in the past. We'd like to build that at scale to help support our value proposition and ultimately work with some of the larger players to facilitate our access [indiscernible] to the broader East Coast electricity market. I'll be able to bring more information to that as those studies mature, but it's certainly an area that I'm very, very excited about. In terms of our strong financial position, I think what I wanted to do here is to demonstrate that. Our current net debt is sitting around that high $400 million. We have equity well over $3 billion, and our current net gearing is sitting at around just under 14%. We hit peak gearing later this year and well aligned to our target of having gearing around 15%. We will be looking to lever that down as soon as Waitsia comes online. But as you can see, one of the strongest balance sheets of our peers going around. Our gearing is really linked to Waitsia and, obviously, what we're seeing in gas prices and liquids prices over the next few years. So outlook, and this is probably coming to a really important and critical slide for everyone. We're currently FY '24, trending to just above that 18 million barrels production level. Through the KS-9 well, we're seeing that well didn't work out and we had that recent impairment. We're seeing lower production there. Our Bass asset is coming to end of field life. Again, we have done an impairment on that asset over the last few weeks. And you can see that we've got accelerated -- decline across that, and which we're focusing down on production there. We're seeing high annual declines across our Western Flank portfolio. That is a function that we haven't been drilling in the Western Flank over the last 8 months. And we're looking to not execute additional wells up until late FY '25, early FY '26. So we expect our liquids production to fall during this period. And obviously, across the Cooper Basin, we're seeing relatively flat production or that's -- and we're very much in line to operate its forecast for that asset. Where we have a significant upside, obviously, is in the Otway Basin. And I have taken appropriate conservatism associated with those forecasts to reflect the flexibility that Origin has through that contract. We've been able to improve the take-or-pay levels, but they can spread their take-or-pay burden across a calendar year, where we forecast across the financial year. So there's a little bit of difference there. But -- so what we're doing is just being prudent and conservative associated with our Otway production. And similarly, you can see through the Perth Basin, and you may be wondering why there's a bit of an overlap there between that and the Otway Basin assets. And it's really a function of when it ramps up and really starts to come online. So, there is significant upside associated with the Perth Basin, the earlier we get that on. But we're not going to guide that at this point in time. I think it's prudent for me to maintain some conservatism around our production profile. You will see that the range, it's 17.5% to 21.5% is very broad. It's very broad because we're still very early in the cycle. I will look to sharpen up that range as we move into full year accounts this year. But I thought an appropriate broad range is important. Really one of the key focuses for me through today is to completely reset the business expectations and to make sure that I have a solid base in which we can move forward from. So I will take very much that as the position we have in terms of our production. Our capital structure, as I mentioned before, but just to reiterate it. We're guiding between the $700 million and $800 million with our sustaining capital being $425 million to $475 million and our growth capital would have been $275 to $325 million. And obviously, that is really a function of Moomba CCS and final stages of Waitsia Stage 2 drilling as well as the project execution piece. We can keep moving forward. In addition, through the strategic review, I have decided to do a very deep assessment of where our current reserves position is. And as previously highlighted through the impairment, there has been a write-down associated with the Kupe South 9 value story, which obviously has an impact on reserves. So though we haven't finalized our reserves position, I always thought, I think it's also prudent to give people a steer about where those are going. So across Kupe, we're expecting to see in the order of that circa 7 million barrels of reserve production associated with Kupe. In the Perth Basin, through the drilling of the Beharra Springs Deep well, we have made an overall download assessment of the broader Beharra Springs field. We saw lower reservoir quality than expected. And we've extrapolated that across the broader Beharra Springs closure, which has made a reduction there. In total, since the Perth Basin -- the impact of the Perth Basin in the order of 4% of its current book reserves. We're seeing upsides associated with Redback Deep, which has given us a number of circa around those 5 million barrels of impact associated with those assets. There is no change at all to the Waitsia reserves. They remain intact. It's really associated with Beharra Springs asset, where we've seen lower reservoir quality and potential connection to a fault that has limited our current estimate of that asset. Associated with the Otway basin, we're also seeing across our Thylacine North wells, which came online in May this year. They have been depleting a little bit quicker than what was expected pre-drill and what has been expected in our reserves position. That has -- early depletion is typical of these wells. And what they not then do is connect to a broader full volume and they flatten out. These wells have depleted slightly faster than all offset wells. So I found it prudent to take a write-down against those volumes, effectively representing about 6% of the Otway volumes in total. But I'm steering people to around that 5 million barrels of impact against our broader Otway position. That has no impact to the upcoming Thylacine North wells, just to be clear, which is really just around the -- sorry, Thylacine West Wells, it's just really around our Thylacine North Wells that have come online in May. Minor revisions around the Cooper Basin just to be in line with operator. So where are we? What have we done? We've completely refreshed each strategy. We've refreshed our organizational structure. We've identified our core hubs and focus on those 4 hubs to deliver value. We've installed strict operating principles with setting new financial targets across our business. We installed a disciplined investment framework to make sure that we, through growth, we execute things that are accretive and valuable. So far, we delivered $135 million of operating costs and capital reduction savings across the business, 23% headcount reduction is currently executed with $35 million of field operating cost savings and $100 million of sustaining capital expenditure reduction. Where do we want to go? We want to continue the journey of further cost savings and reductions. We will reach our 30% headcount reduction this year. We will deliver in FY '26 our field operating cost target of $11 a barrel. And we will be moving our sustaining capital of reduction to around that $100 million. That is converting some of the savings we have today, but as well as to chase additional savings and make sure that they're structurally locked in place. We will deliver in FY '25, our $30 a barrel of free cash flow breakeven. The other focus areas is we're really focused on our additional exposure to short term and spot sales, giving Beach more and more exposure to global liquid trends. We are going to deliver our 40% to 50% of pre-growth free cash flow for fully franked dividends, which I think delivers significant value to our shareholders. And we are looking very disciplinely at potential acquisitions across the portfolio. And as I mentioned several times in today's presentation, I see great opportunity for Beach for sustaining storage as well as potential for more adjacencies with things like gas peaking across the East Coast gas markets. So in final summary, our ambition is to become Australia's leading domestic energy company. We are connected to and we'll be supplying Australia's key energy markets. We have a very strong financial position. And we will be increasing free cash flow for dividends and growth. We have multiple near and mid-term value catalysts. And we have opportunities such as CCS which has us aligned to our Paris obligations and it supports our decarbonization and focus on making sure that we have abated oil and gas portfolio within our business. And then that, I would like to conclude the formal part of the presentations and open up to the floor for any potential questions.

[Operator Instructions] Your first question comes from Adam Martin with E&P. Your next question comes from Gordon Ramsay with RBC Capital Markets.

Brett, I'm just interested in your new strategy of getting involved in gas storage and potentially peaking. I'm just wondering how you would plan to kind of implement that? Would you be looking for a joint venture partner with expertise in, for instance, gas peaking, electricity generation or are you just planning to do this all on your own?

I think I'm comfortable with the generating of the electrons. What I'm not comfortable with is the energy market exposure. So I would be looking for a partner, one of the larger Australian utilities to kind of work with on that. I think there are several that I've had very high-level conversations with, but I think that makes perfect sense. So building infrastructure aligned to our existing asset base, whether that be at Katnook or whether that be across the broader Otway asset base, I think, is very achievable for Beach under its own team. But ultimately, what I don't really want to build is a retail desk or energy markets exposure. I don't think we have blatant capacity to do that ourselves. So I think that will require a collaboration with one of the large retailers through this sector. And I think some of those larger retailers are struggling getting peaking infrastructure built themselves. So I think there's a great synergy between a group like ours and some of the large energy market players.

And just the obvious question on wage. It looks like it's pushed out a bit further. Is there anything that has come up in the last few months that has led you to do that? You're saying Clough has obviously moved closer to Beach's time frame and any stock that they had in their profile is gone now. Can you just comment on what caused the changes there?

Yes. So we haven't changed our guidance. I think the timeline that Clough had is more getting aligned to ours. I think the key -- there hasn't been any new quality issues that are being raised at all. I think the reality of the situation is they're not getting the productivity numbers high enough across their execution. I don't think you can put any more people at site. They are effectively at max people capacity. And I think part of it has been pivoting from the rectifications that have been going on in the last few months and more forward moving to the pre-commissioning phase at the moment. But unfortunately, now they're doing things like the pressure testing, which is good. And I think the critical milestone, which is first gas at the end of July is really important for us to kind of make sure that we can deliver this. We'll see that late this year, which is aligned with their schedule or early next year, which is aligned with ours.

Well, first gas end of July and then you're seeing start-up really 2025?

Sorry, no, no, no, sorry. First gas into the plant for commissioning, sorry, sorry. Yes. So it's one of the critical things for getting a plant for the commission is introducing the gas into the operating system. We won't be exploring at that point. It's just to test all the systems and make sure everything holds together. And then that effectively has that 4, 5 months' worth of commissioning period before we can start exploring.

Your next question comes from Tom Allen with UBS.

I was hoping you could please outline more detail on Beach's reserve replacement strategy? Just including what proportion of your reserve replacement strategy is targeted by exploration and appraisal of your existing assets versus organic growth? Just because you've announced net reserve downgrades across all assets, including Perth and Otway's today. Interesting that you called out Thylacine North declining faster than anticipated. If you could share a comment on an annualized decline rate you've seen at Thylacine, that would also be helpful.

Yes. So I don't have the annualized decline rate yet at Thylacine, it's only been on for several months. Those wells typically come off quickly and then plateau out. And we're just waiting to see the plateau until we're absolutely sure where we are in terms of that. But I feel the reduction there is more than ample to cover any contingency. In terms of reserve replacement ratios, we have a great array of opportunities associated with things like Hercules and Mavis associated with the Otway. We're looking at opportunities across the broader Perth Basin. I think the critical one is the Western Flank. We're building inventory at the moment. So we have an opportunity to do both organic and inorganic reserve replacement. So I think you're probably more steering on the organic side. So Mavis and Hercules, when they come up in FY '26, will be important for the continued backfill associated with those assets. And then our FY '25 program in White series is effectively a development drilling. And then we'll be looking for additional exploration moving forward across our footprint in those assets.

It would be nice if you could just elaborate a little bit further about on Hercules and Mavis prospects. Maybe with some color on your P50 estimated gas in place. What an indicative development plan might look like? And also, what proximity do these have to the drilling that [ Conoco ] is doing in the Otway?

Yes. In terms of Conoco's drilling activity is much better outboard than our assets. So Hercules is in close proximity to our existing Otway gas infrastructure. So that'd just be a tie back through the existing facility. So when we -- if Hercules is a success, we'd apply that via Artisan through our existing plants across the Otway Basin. We don't have any current targets around the [indiscernible] assets. So this is all coming through the Otway footprint. And then Mavis is a little bit further down the coast, but well then tie back to again our Otway gas plant facility. Both Mavis is well in excess of 100 Bcf. And Hercules is in the mid to high 100s in terms of Bcf category. I haven't given any more clarity of that. What we'll look to do is give an opportunity refresh at our full year results. And I'll give Bill an opportunity to speak to the exploration targets and the scale of those as we work through those with the joint ventures moving forward.

And if I could just sneak one more. Just hoping for a little bit more color on the gas storage asset that's adjacent to some of your assets. So which assets specifically, could you just tell us a brief comment about the drive mechanism and perhaps what your estimated storage injection withdrawal capacity or a range around what you think it might be able to do?

Yes. So we're looking around the Black Watch, Speculant Halladale, really the near shore facilities, very, very high delivery rates. I'll give full details of those. We're still kind of in the mid study. So it's looking really exciting for us. But we'll -- I'll give an update to that at our full year, but very close to our existing infrastructure and high export rates, which is a critical enabler for quick response when Victoria needs it. Yes, I suppose the best way to describe that. And sorry, the other one is Katnook as well. So Katnook is on the South Australian side of the Otway Basin. And South Australia is moving to a world of a gas capacity mechanism. So we're looking to work with the South Australian government to better support them through gas storage as well as peaking supply at that market, which is an interesting one for me with South Australia with the highest level of renewable penetration anywhere. The importance of gas peaking as an enabler for further renewables is kind of well understood now by governments. And I'm keen to see both the Victorian and the South Australian governments head in this direction.

Your next question comes from Henry Meyer with Goldman Sachs.

Thanks for the update today. Just a question on the sustaining CapEx outlook. It's a little bit higher than the market may be expecting. Are you targeting another $100 million cost out per annum? Are you able to touch on a bit of color around what are some of the bigger ticket items required here to get that cost out? Does the target include divestment of the noncore assets as well, please?

Yes. I think one of the big drivers to lower that is [ Basker ] represents a large of our large cost base in our operating costs, but there's also some sustaining costs in there as well. You'll see from the pack that there is a lot of costs associated with the SACB joint venture. So I think critically success for us is working closely with Santos to help facilitate the lowering of sustaining capital through that base. You'll note that the areas that we're in charge of, we've done a significant job on sustaining capital. So that close working with both Mitsui and Santos will help deliver additional improvements against our sustaining capital exposure base.

And back on exploration, some of the prospects here. You've got a good pipeline of organic growth. But we're expecting reserve write-downs at most assets this year. When you compared this review, was there anything identified in particular that contributed to some of these disappointing subsurface outcomes? Any changes going forward to reduce that risk in the future?

Yes. So I think for me, having Bill Ovenden onboarded is a real positive for me, given he's run Santos' subsurface for many, many years. So that discipline through his business is really strong. So I'm looking forward to having that as a place allied to the business. In terms of the reductions across the broader Perth Basin, I think most people have seen highly variable outcomes across the Perth basin. Whereas when some of those volumes were booked, I think there was much more confidence in the connectivity across the basins. And what we're seeing through our own drilling and through the drilling of peers is much more variability in subsurface than what was originally envisages. So in my mind, I've taken a prudent view of making sure that I don't have any overhang moving forward. I don't want to be coming back to the market making further adjustments. So I've taken a view of correcting where I thought it was appropriate.

Your next question comes from Nik Burns with Jarden Australia.

Maybe starting off with FY '25 production guidance and your reserve updates. I'm sure you're aware, in recent years, Beach has had a bit of a track record of not being able to meet its production guidance estimates. So this is your first opportunity here to set production guidance and review reserves. I'm sure you're aware that guidance range is below consensus estimate. So within this, I guess, 3 quick questions. One, how confident are you in achieving this production range? Two, what's the biggest variable in this range? And 3, what would you say to those who would think that your forecast here might contain a layer of conservatism? And could you potentially beat your numbers presented here?

I'll try and answer them in reverse. Yes, my absolute ambition is to beat our consensus. And I think it's very much on the line to the view that if you look back at Beach's forecast over the last 5 years, they've assumed a lot of volume coming out of things like commercial efficiency, which you've seen over the last 12 months with the flexibility that Origin had that it can't be delivered. So I've taken a very prudent view to how we're building our forecast and my goal is to beat this. So I think what I've given is a good practical range. I don't imagine that I'll file on the downside. I don't want to put myself in that position where I file on the downside. So I've given myself a range that I can deliver within. I think the critical uncertainty associated with our production is probably the rate at which the Western Flank and certainly Western Flank. The rate at which Waitsia ramps up, getting an accelerated ramp up at Waitsia, add significant volume to our portfolio, getting high offtake from the Otway. If we have a long cold winter and as we see further and further shortages out of the other operators in the Otway Basin, we see upside associated with both Otway and both Perth Basin and then ultimately delivering a program that unlocks value in the Western Flank is going to be critical. So I think the negatives are really the Taranaki, i.e., the Kupe field and the Bass areas, which we took the [indiscernible]. Western Flank has upside. You look through what Santos is trying to deliver through the Granite Wash and their upcoming program. I'm hoping that we can see some upside associated with that production, growing from where it is, so we're currently targeting flat. And then there's upside associated with Otway and Perth Basin. But what I've tried to do is deliver a range that I feel comfortable with and I can deliver against.

Maybe just one on inorganic growth. You talked previously about wanting to earn the right to do M&A and that right would be through executing on the cost-out strategy. Do you feel that you've now earned that right? So are we right to think that M&A is now firmly on the radar and we should expect Beach to be actively involved in the opportunities that appear in the market. And I know you didn't really restrict yourself to M&A in Australia. So could you look overseas as well?

Yes. Again, I'll do it in reverse. No, I won't be looking overseas. I'm really excited about the opportunities across the East Coast and West Coast. I think there's opportunities there to participate in. I still don't think I've effectively earned the right at this point in time. I still need to deliver opportunities. And I think the question before about sustaining capital is one of those. We need to make sure that we deliver against our expectations and our goals and that is really important. However, there are opportunities out there. So, I would hope that later this year, maybe early next year after -- unfortunately, it's only been 4 months for me. I don't think you can trust me at this point in time. But I hope as I continue to perform in terms of demonstrating our cost diligence and our performance against operations. Then, I'm sure, Nik, you'll be one of the first people to tell me whether you think it's time for me to move forward. But at this point in time, I'm happy to look at opportunities. But I'm not going to be executing anything in the near term.

Your next question comes from Mark Wiseman with Macquarie Group.

Brett, thanks for the update today. Just a few questions. Firstly, on the sustaining CapEx. I just wanted to clarify, the $450 million, that is after the $100 million per annum of savings. Has that all sort of been harvested in that $425 million to $475 million or is there more to come in FY '26?

That $425 million to $475 million includes the $100 million of savings. So yes, sorry, I'm not sure if that was the question before. There's not another $100 million coming off that in 2026.

Yes. I just wanted to clarify that.

Yes. Just to add to that, Mark, obviously, we did talk to sort of there is sort of potential further opportunity through working with Santos on the CB JV, which is where our large portion of the cost come from. So there's potential for further cost reduction there, but not baked in.

Yes. It's a really good point, actually. Just so everyone is clear. I haven't included any cost reductions across any of our non-operated assets. But there's no cost reductions associated with our West Australian Waitsia position. And there's no cost reductions associated with our SACB Kupe Basin position. They're all, work is in progress and discussions ongoing with operator. So there could be some headroom there. And I'll continue to work with operators to make sure that we can try and realize some of those.

Yes, that's great. And that was actually going to be my next question. I understand you can't sort of front run what Santos may be coming out with at some point. But how transformative do you think the change in the operating model in CB JV could be? I think you've highlighted 50% of the $150 million stay in business is related to that asset. I mean, are we talking about a significant step change here? Or would it be incremental?

Well, I've just received a whole lot of material from them in the last few days, which looks really exciting. I think I would like to dive into that in a little bit more detail. Kevin is a bit of the master of the cost out and Brett Darley is such an amazing executer of that. I have a lot of confidence that they can deliver. I'm just not willing to kind of give them a quantum at the moment. And I think it's probably the best place that operator directs on that. Hence, we haven't given any specific guidance through here. That is really the mission that Kevin and Brett are currently on.

Can I just ask on Beharra Springs Deep? You've made some upgrades in the Perth Basin whilst cutting Beharra Deep. I think previously, the Beharra Deep number was about 350 PJs. Are you able to talk about how Beharra Deep is in absolute terms now?

Actually, I don't have that off the top of my head. I'm sorry. I'll have to get back to you, Mark, if that's okay.

Yes. But in terms of developing Beharra Deep, does it effectively -- I think it's been producing at 25 terajoules a day or thereabouts. Is that the plan going forward? Or do you intend to sort of ramp up that asset at some point?

No, yes, sorry, for Beharra, we've got plenty of resources to continue production through that domestic gas plant that it services. I think there is enough scale in Beharra Deep in the event that we're able to connect that through to Waitsia. But it acts as really good backfill scale to the Waitsia opportunity. So there is plenty of scale in that asset. So that really is pending on the -- what is now a delayed, I'd say, government position on domestic gas. And we're obviously working with not just our joint venture, but the whole industry about trying to facilitate a good outcome for both domestic supplier as well as more export-facing volumes.

And just finally for me, just on decommissioning CapEx. I mean, we had Kupe producing through to the early 2030s. It sounds like with the 40% reserve downgrade to Kupe, it sounds like that's probably sooner. And then with Bass gas as well. If you could just talk about when do you expect to be spending decommissioning CapEx on Kupe and Bass gas?

Yes. So we've still got plenty of life left in Kupe. It's just the peak rates are going to be much lower. So it will be above free cash flow breakeven by a good distance for well into the 2030 still across Kupe. And Bass gas, we're currently refreshing our abandonment provisioning. So I don't have any updates today. We are looking at alternative uses for that asset. That could potentially also be the potential for storage. So we're working forward on that. So Kupe, sorry, Bass is end of field life is still not until, I think, late next year. Yes, '27, I should say. So we've still got some time to get that right.

Your next question comes from Saul Kavonic with MST.

Just one main question for me. Looking just -- you think you've given us a really good reset here of the kind of base case outlook that's conservative. But trying to get a sense of what things look like, I guess, in the production front post FY '25. I just note consensus still seems to be around the 27 million to 28 million barrels numbers in FY '26 and '27. But if I look at your production guidance, FY '25, just excluding [ Waitsia ] [indiscernible] together, it's looking relatively flat FY '25 versus FY '24 at 18 million barrels. And if we Waitsia on top, that then equally gets us to the 23 million or 24 million barrel, maybe 25 million barrel mark. How should we think about production post FY '25, particularly '26 and '27? Just kind of want to make sure that the market has got a good sense of that, so we don't have an issue coming into the guidance for those years.

Yes, it's a really good point. We're currently not physically giving guidance for the outer years. But I would say that the numbers you said at the start that '27, '28, I don't see our forward forecasting reaching those levels. I think effectively around those mid-25-million-barrel levels, probably more realistic with Waitsia online, with Otway performing as it is, and Kupe effectively staying flat. We'll be -- I think one of the challenges you've seen associated with assets like the Otway is they're not super-long life, not like the Kupe Basin. So opportunities like Hercules and Mavis give us much more length. So what I want to see is some of those opportunities come into the portfolio so that, that can give us a lot more length associated with the -- with our outlay position. So effectively, we've got a peak production profile around that '26, '27-year range. And we still need to do some more work to bring volumes in to maintain that looking forward. So there is some decline. I know that the market currently doesn't have much decline associated with those outer years. But there is some decline associated with those outer years, which I can't currently guide to at the moment.

And just a quick follow-up with Hercules, all those prospects for Otway at the end of next year, assuming they're successful, is there a development pathway for it to come online anytime to extend plateau? Or would we still likely see a dip before they'd be able to come online?

I think there may be a minor dip. But I guess what we're trying to do is target that '28 timeline, '29 timeline for something like our Hercules to come online. So this is before I completely concluded the development study. But we believe we can have flow lines and all that equipment in place and working with some of the other operators in the regions to have opportunities such as Hercules connected around that time line, that would try and limit any dip that we see across that Otway portfolio.

Your next question is from Sarah Kerr with Morgan Stanley.

So I just wanted to understand why you're not confident into getting into electricity trading if you have a gas [indiscernible], capturing market volatility is kind of the value proposition of that.

Yes, no, obviously, I want to capture the volatility. But I don't -- what I'm speaking out specifically is that I don't want to have relationships with moms and dads and residential. So accessing industrial electricity supply, I think that could make sense. But the kind of retail sector is kind of beyond where we are at the moment.

Okay. And I just had a question on Bass field. So you've done that impairment. Does that now preclude you from getting a good potential sale price for them for all of those undeveloped fields?

No, we've just taken the value of the books, if the opportunity comes.

Just put a value on them. And now would you be able to sell them, I guess, for any more than you've put the value on?

Yes. I think, for me, it -- the risk profile is not there for Beach to execute those. So if others see the opportunity to do that, well, then I'm happy to have that conversation. I think it's the right thing to do to take it off the books when we're not going to execute it within our timeframe. So it's being prudent.

There are no further questions at this time. I'll now hand back to Mr. Woods for closing remarks.

Thank you very much. I appreciate the questions. I look forward to catching up with many of you over the next few days. Again, it's an important reset for Beach. I am very excited about what the future will look like for us. We've got a lot of exciting opportunities. And I'm looking forward to bringing you on the journey with that. So again, thanks very much for your time. Cheers.

That does conclude our conference for today. Thank you for participating. You may now disconnect.