ANNUAL
REPORT
2018
Successful transition
with strong growth
platform
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Beach Energy Limited
ABN 20 007 617 969
Our vision, purpose and values are clear
and concise statements that define Beach
as an organisation. These statements
have been developed to be enduring, and
to navigate us through the longer term.
We are truly a
transformed company,
proud of our history and
focussed on the future.”
Beach Energy Limited | ABN 20 007 617 969
We are Australia’s leading mid-cap oil and gas exploration and production company.Our portfolio is diverse, with onshore and offshore operations in five basins across Australia and New Zealand.We are helping to meet the growing demand for energy, supplying about 15 per cent of the east coast gas market. IN THIS REPORT
Overview
About Beach Energy
Our strategy
Financial performance
Chairman’s letter
Chief Executive Officer’s report
Review of operations
Sustainability
Board of Directors
Executive team
Full Year Report
Directors’ report
Auditor’s independence declaration
2018 Remuneration in brief (unaudited)
Remuneration report (audited)
Directors’ declaration
Full year financial report
Notes to the financial statements
Independent auditor’s report
Additional Information
Glossary of terms
Schedule of tenements
Shareholder information
Corporate information
01
02
04
06
08
10
14
26
30
32
34
35
58
59
60
75
76
81
117
125
125
127
131
132
Competent Persons Statement
The reserves and resources information in this
Annual Report is based on, and fairly represents,
information and supporting documentation
prepared by, or under the supervision of,
Mr Tony Lake (Manager Development Western
Flank Gas). Mr Lake is an employee of Beach
Energy Ltd and has a BE (Mech) degree from
the University of Adelaide and is a member of
the Society of Petroleum Engineers. The reserves
and resources information in this report has been
issued with the prior written consent of Mr Lake
in the form and context in which it appears.
Annual General Meeting
Venue
Adelaide Convention Centre
Address
North Terrace, Adelaide SA 5000
Date
10.30am, Friday, 23 November 2018
Callawonga facility,
Cooper Basin,
South Australia
Annual Report 2018 01
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION ABOUT
BEACH
ENERGY
Australia’s largest onshore oil producer,
with a major gas business
Beach Energy is an ASX listed, oil and gas, exploration and
production company headquartered in Adelaide, South
Australia. Founded in 1961, it has operated and non-operated,
onshore and offshore, oil and gas production from five
producing basins across Australia and New Zealand and is a
key supplier to the Australian east coast gas market. Beach’s
asset portfolio includes ownership interests in strategic oil and
gas infrastructure, such as the Moomba processing facility and
Otway Gas Plant, as well as a suite of high potential exploration
prospects. Beach is focused on maintaining the highest health,
safety and environmental standards.
Beach has established a world-class operated oil business
on the Western Flank of the Cooper Basin, and has grown to
become Australia’s largest onshore oil producer. We have an
active operated drilling program focused on key Western Flank
play fairways, and we continue to develop our acreage across
the Cooper Basin.
Beach also has a major gas business comprising operated
and non-operated, onshore and offshore assets across five
producing basins that supply gas to the Australian west coast
and east coast markets and the New Zealand market. With its
Cooper Basin, offshore Otway Basin and Bass Basin producing
assets, Beach supplies approximately 15% of Australian east
coast domestic gas demand.
In addition to its producing assets, Beach has permits in the
onshore Otway, Bonaparte and Browse basins in Australia and
the Canterbury Basin in New Zealand.
Beach continues to pursue growth opportunities within
Australia and nearby which align with its strategy, satisfy strict
capital allocation criteria, and demonstrate clear potential for
shareholder value creation.
Beach is also committed to engaging positively with the local
communities in which it operates, providing local employment,
as well as partnerships with a range of clubs and organisations.
FY18: A transformational year
During the financial year, Beach acquired the Lattice Energy
Group, Benaris’ interest in the Otway Gas Project and
Toyota Tsusho Corporation’s interest in the Otway Gas Project
and the BassGas project. Beach acquired these interests for
$1,532 million in consideration with an effective accounting
acquisition date of 1 January 2018.
To fund the acquisitions, Beach raised approximately
$301 million through a 3 for 14 pro–rata accelerated
non–renounceable entitlement offer and entered into
banking arrangements to access $1,475 million in credit
facilities, including a $450 million revolving credit facility.
Today, Beach has an expanded footprint with five production
hubs and significant gas processing infrastructure.
02 Beach Energy Limited | ABN 20 007 617 969
OUR VISION
We aim to be
Australia’s premier
multi-basin upstream
oil and gas company
OUR PURPOSE
To deliver sustainable growth
in shareholder value
OUR VALUES
Our values define us, guide our actions,
our decisions and our words
Safety
Creativity
Respect
Integrity
Safety takes precedence
in everything we do
We continuously explore
innovative ways to
create value
We respect each other,
our communities and the
environment
We are honest with
ourselves and others
Performance We strive for excellence
Teamwork
and deliver on our promises
We help and challenge each
other to achieve our goals
Our committed people and our
values-based culture are our foundation
for success
The transformational event in
FY18 was the acquisition of Lattice.
This was a unique opportunity
for Beach, and provides us a large
and diversified footprint across
Australia and New Zealand,
significantly increasing our scale
while continuing to maintain
financial strength.”
MATT KAY
CHIEF EXECUTIVE OFFICER
0
500km
Gas pipeline
Gas pipeline
(proposed)
Major Basin
Beach permit
interest
Bonaparte Basin (Offshore)
Darwin
Browse Basin
Bonaparte Basin (Onshore)
Perth Basin
Waitsia
(Beach 50% non-operated)
Beharra Springs
(Beach 67% operated)
Western
Australia
Perth
INFRASTRUCTURE
PRODUCTION
EXPLORATION
Northern
Territory
Queensland
Cooper Basin
Cooper Basin
(Various operated and
non-operated interests)
Moomba Gas Hub
Moomba
Brisbane
South
Australia
New South Wales
BEACH HEAD OFFICE
Adelaide
Sydney
Otway Basin (Onshore)
Victoria
Canberra
OPERATIONS OFFICE
Melbourne
Taranaki Basin
Kupe
(Beach 50%
operated)
New
Plymouth
(Regional
Office)
Otway Basin (offshore)
Otway Gas Project/HBWS
(Beach 100% operated)
Bass Basin
BassGas
(Beach 53.75% operated)
Tasmania
Hobart
Wellington
Canterbury Basin
Please note map is not to scale
FY18 Pro Forma Production1 – by region
– by oil vs gas and gas liquids
7%
12%
51%
RECORD
PRODUCTION
OF
26.8
MMboe
27%
3%
Cooper Basin
Perth Basin
Otway Basin
Taranaki Basin
BassBasin
BEACH
OPERATES
~70%
of production
22%
OIL
78%
GAS
1. Pro forma FY18 defined as a Beach FY18 reported production of 19.0 MMboe plus H1 FY18 Lattice production of 7.9 MMboe.
H1 FY18 Lattice production was not consolidated within the accounts of Beach. This information is provided for information
purposes only and should not be relied upon.
Note: Due to rounding, figures and ratios in tables and charts throughout this annual report may not reconcile to totals.
Annual Report 2018 03
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
STRATEGIC
PILLARS
FY18 Progress
OUR
STRATEGY
Our clearly articulated strategy provides the
roadmap for sustainable growth through the cycle
Beach’s strategy is premised on its Vision: We aim to be Australia’s
premier multi-basin upstream oil and gas company, and its Purpose:
To deliver sustainable growth in shareholder value. To achieve these
goals, four strategic pillars drive all decision making and serve as a
roadmap for the future.
THE STRATEGIC PILLARS ARE
1. Optimise our core in the Cooper Basin
2. Build a complementary gas business
in east coast basins
3. Pursue compatible growth opportunities
in Australia and nearby
4. Maintain financial strength
FY18 was transformational for Beach, headlined by the Lattice
acquisition which was a unique fit against all of the strategic
pillars. The adjacent table summarises progress made against
each strategic pillar during FY18.
FY19 is expected to the biggest ever investment year for Beach
as we seek to exploit the high calibre portfolio of investment
opportunities. Details of the FY19 capital program can be found
later in this annual report, within the Directors’ Report.
The acquisition of Lattice
demonstrated Beach’s cost and
capital discipline. As integration nears
completion and our financial position
continues to strengthen, we continue
to assess growth opportunities in a
disciplined manner.”
LEE MARSHALL
GROUP EXECUTIVE CORPORATE STRATEGY AND COMMERCIAL
04 Beach Energy Limited | ABN 20 007 617 969
Pillar 1
Pillar 2
Pillar 3
Pillar 4
Optimise our core
in the Cooper Basin
Build a complementary
gas business
in east coast basins
Pursue compatible
growth opportunities
in Australia and nearby
Maintain financial
strength
§ Cooper Basin production
increased to 12.3 MMboe
§ Cooper Basin 2P oil and
gas reserves increased
71% to 128 MMboe at
30 June 2018
§ 14 MMbbl of 2P oil
reserves added in the
Western Flank driven
by successful application
of horizontal drilling
technology and continued
excellent production at
the Bauer oil field
§ Broad ranging operating
and cost efficiencies
including the introduction
of the fit-for-purpose
shallow-well drill rig in
the Cooper Basin JV
§ Completion of major
infrastructure expansion
projects such as the
phase-one expansion
of the Middleton facility
to 40 MMScfd raw gas
capacity
§ Addition of a third
Cooper Basin JV drill rig
and focus on faster drill
times saw participation
in 96 wells, up from
58 in FY17
§ Beach now supplies
approximately
15 per cent of the
east coast domestic
gas demand
§ Lattice acquisition
adds an expanded
development
and exploration
opportunity set
§ GSAs in place with
attractive price and
structure: annual
step-ups and CPI
adjustments and
market price resets
every 3–4 years
§ Lattice acquisition was
a unique fit against all
of Beach’s strategic
pillars and acquired
at an opportune time
in the cycle
§ Beach moved to
strategic 100%
ownership of the
Otway Basin assets and
commenced a process
for the proposed sell
down of these assets
§ Frontier exploration
opportunities in
three basins
§ Agreed potential
farm-in to Ironbark
exploration prospect
in the Carnarvon
Basin, WA
§ $301 million
entitlement offer
undertaken
§ Arranged
$1,475 million in credit
facilities, including
$450 million
revolving credit
facility
§ Net drawn debt
reduced by
$221 million since
financial close of
Lattice acquisition
to $639 million at
30 June
§ Net gearing ratio
under 26% is well
ahead of initial
targets
§ Available liquidity
of $761 million at
30 June 2018
§ Free cash flow
of $349 million
generated in FY18
§ Interim plus final
dividend of 2.0 cents
per share
Beach has made tangible progress against its four pillar strategy since its implementation in August 2015. In light of the
transformative Lattice acquisition, the Beach strategy is being assessed in the context of the new enlarged organisation.
Annual Report 2018 05
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION FINANCIAL
PERFORMANCE
Financial performance in FY18 demonstrates
the step change from the new asset base
SALES VOLUMES
MMboe
SALES REVENUE
$ million
92%
1,251
OPERATING
CASH FLOW
$ million
25
20
15
10
10.8
10.5
10.8
11.8
5
0
70%
20.1
1050
1,052
875
700
525
350
175
0
728
653
558
583
600
525
450
375
300
225
150
75
0
319
229
233
108%
663
FY14 FY15 FY16 FY17 FY18
FY14 FY15 FY16 FY17 FY18
FY14 FY15 FY16 FY17 FY18
UNDERLYING NPAT1
$ million
86%
302
UNDERLYING EPS1
cps
259
20
20.3
162
91
36
63%
13.9
16
12
8
4
0
8.5
7.0
2.4
FULLY FRANKED
DIVIDENDS
cps
4.00
Unchanged
2.00
2.00
1.50
0.50
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
FY14 FY15 FY16 FY17 FY18
FY14 FY15 FY16 FY17 FY18
FY14 FY15 FY16 FY17 FY18
UNDERLYING NPAT1
$302M
86%
FREE CASH GENERATED
BY THE COOPER BASIN JV
$126M
19M
STRONG CASH FLOW
AND BALANCE SHEET
OPERATING CASH FLOW
$663M
108%
1. Underlying results in the charts above are categorised as non-IFRS financial information provided to assist readers to better understand
the financial performance of the underlying operating business. They have not been subject to audit or review by Beach’s external auditors.
Please refer to the table on page 44 for a reconciliation of this information to the financial report.
06 Beach Energy Limited | ABN 20 007 617 969
2018 was a strong
year of delivery and
most importantly,
safety remained front
and centre through
relentless focus
and delivery of safe,
reliable and efficient
operations across all of
our producing assets.”
DAWN SUMMERS
CHIEF OPERATING OFFICER
PERFORMANCE
OVERVIEW
Production
2P reserves
2C contingent resources
Sales revenue
Net profit after tax
Underlying net profit after tax
Earnings per share
Underlying earnings per share
Net assets
Net debt / (cash)
Gross gearing ratio
FY14
FY15
FY16
FY17
FY18
MMboe
MMboe
9.6
86
MMboe
467
$ million
1,052
$ million
$ million
102
259
9.1
74
677
728
9.7
70
205
558
(514)
(589)
91
36
10.6
75
153
653
388
162
7.9
(39.6)
(39.6)
20.4
cps
cps
20.3
7.0
229
2.4
233
8.5
319
$ million
1,871
1,355
1,075
1,402
1,838
$ million
(261)
(20)
(49)
(198)
19.0
313
207
1,251
199
302
9.2
13.9
663
639
34.2
2.0
2,277
1.755
Cash flow from operating activities
$ million
583
Fully franked dividends declared per share
cents
4.00
%
8.6
11.0
1.50
13.5
0.50
11.8
2.0
Shares on issue
million
1,292
1,300
1,861
1,874
Share price at year end
$
1.68
1.05
0.61
0.575
Market capitalisation at year end
$ million
2,171
1,365
1,135
1,077
3,995
Annual Report 2018 07
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
CHAIRMAN’S
LETTER
GLENN DAVIS
CHAIRMAN
As we continue to
deliver strong returns
on shareholders’ equity
the new financial year
sees the start of a multi-
year exploration and
development program
across our now much
expanded portfolio.”
GLENN DAVIS
CHAIRMAN
Dear Shareholder,
In this letter last year, I wrote of the
considerable change in the business,
the excellent results our focus on costs
and efficiency had continued to deliver
and the expected benefits of the Lattice
acquisition that had yet to close.
In FY18 our continued focus on safe
low cost operations has again borne
fruit as has our acquisition of Lattice.
Throughout the acquisition and its
integration, we have maintained
the Beach culture regarding our
safe low cost operating model.
As a consequence, the executive has
delivered a smooth integration of Lattice
employees and assets at the same time
as capturing $37m per annum in savings
at the end of FY18 with more to come.
This approach to business, together
with favourable oil prices has further
strengthened the financial position
of your company. Underlying NPAT
of $302m and operating cash flow
of $663m signify the growth in, and
strength of, Beach. This performance will
enable us to continue to pay down debt
associated with the Lattice acquisition
quickly seeing us with net gearing of
under 26% at the close of FY18.
As we continue to deliver strong returns
on shareholders equity the new financial
year sees the start of a multi-year
exploration and development program
across our now much expanded portfolio.
One of the key drivers in the Lattice
acquisition was to deliver an enlarged
portfolio across Australia and New
Zealand. Our multi-year program is
designed, in a disciplined and efficient
way, to unlock the value in those assets.
That program requires significant capital
investment on an ongoing basis. Such
is the nature of an upstream oil and gas
company. As performance shows, that
capital will continue to be allocated in
a diligent and disciplined way.
The board is expecting another year
of strong operational performance.
We expect underlying NPAT, operating
cash flow and return on capital to all
continue to grow in FY19 as we invest
to realise the tremendous portfolio of
assets Beach now has.
Board changes occurred with the
retirement of Fiona Bennett at last year’s
AGM and Jim McKerlie at this year’s
AGM. We thank both Fiona and Jim for
their contribution as directors during
an important time at Beach.
In February we welcomed Joycelyn
Morton to the board. Joycelyn brings
a diverse financial and executive
background to your board.
08 Beach Energy Limited | ABN 20 007 617 969
Two vacancies now exist at board level.
We are considering the required skill
sets to add value at the board table.
We will appoint appropriately qualified
and experienced people who we believe
can help drive returns for shareholders,
maintain our high standards of
governance and who improve the
diversity of our board as a whole.
Thank you to the executive and all
employees at Beach who should be
proud of what they have achieved in
FY18. Thank you to our shareholders
for your continued support as we look
forward to again delivering strong
returns on the capital you have invested
in the company.
Glenn Davis
Chairman
5 October 2018
Cooper Basin,
South Australia
Annual Report 2018 09
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION CHIEF
EXECUTIVE
OFFICER’S
REPORT
Dear Shareholder,
At Beach we call FY18 a ‘transformational’
year. As I write to our shareholders
and reflect on the change that has
occurred, this description feels like an
understatement.
The key event in FY18 was the acquisition
of Lattice, which completed in January
this year. Through this transaction, Beach
has enhanced its position in its traditional
home, the Cooper Basin, added
significant operated gas production
in Victoria, gained the exciting Waitsia
resource in Western Australia and we
are now active in New Zealand with the
high quality operated Kupe asset.
Starting the financial year with about
200 staff, we now have approximately
500 full time staff across our diversified
geographic footprint being led by an
expanded executive team, recruited
to bring to Beach their leading global
energy company experience, and
extensive offshore operations experience.
We remain Australia’s largest onshore
oil producer, and Beach is now a key
supplier to the Australian east coast gas
market, supplying approximately 15%
of gas demand.
With our expanded asset portfolio,
leadership team and the continued
support of our shareholders, we
are excited to enter a new phase of
executing our strategy to become a
premier upstream oil and gas company.
But first, reflecting on FY18:
FY18 operational highlights
Pleasingly, our focus on operational
performance and safety has been
maintained through the integration
of Lattice.
We participated in 96 wells in FY18, with
a success rate of 82%. The combination
of strong operational performance, new
wells online and the newly acquired assets
resulted in record annual production of
19 MMboe, up 80% on the prior year.
In Beach’s traditional Cooper Basin
business, we successfully introduced
horizontal drilling to the Western Flank
with the Bauer-26 well. Further horizontal
wells were drilled in the Beach-operated
Stunsail Field and Senex-operated
Growler Field during the year, as well as
in the Santos-operated Cooper Basin JV.
Production from our new offshore assets
was characterised by high reliability at
the Otway Gas Plant in the Otway Basin,
MATT KAY
CHIEF EXECUTIVE OFFICER
With our expanded asset
portfolio, leadership team
and the continued support
of our shareholders, we
are excited to enter a
new phase of executing
our strategy to become
a premier upstream oil
and gas company.”
MATT KAY
CHIEF EXECUTIVE OFFICER
10 Beach Energy Limited | ABN 20 007 617 969
initial incremental gross production
of 4 – 5 TJ/d in the Bass Basin after a
successful wireline campaign on Yolla
and production from Kupe in the Taranaki
Basin meeting high New Zealand
customer demand.
Our first annual reserves audit since
completion of the acquisition of Lattice
saw our 2P reserves more than quadruple
over the prior year to 313 MMboe.
Pleasingly, this increase in reserves
wasn’t solely attributed to acquisitions,
with more than one third of the increase
due to the underlying performance of
the assets and exploration / appraisal
success. Our 2P reserves life has
increased to 11 years at the end of FY18.
Despite the increased operational activity
and unavoidable degrees of disruption
that come from a large acquisition, I am
happy to write that we still maintained
a strong safety performance in FY18.
Pleasingly we saw no lost time injuries
for contractors in FY18.
In terms of our environmental
performance, we continued our sustained
and material improvement in crude oil
spills with the lowest level achieved for the
Company. We are also pleased to provide
our first report on the impact of climate
change on page 28 of this report and work
is continuing on review of our performance
in accordance with recommendations
released by the Task Force on Climate-
related Financial Disclosures.
FY18 financial highlights
The strong operational performance
combined with higher commodity prices
led to an historic full year financial result
for Beach.
Sales revenue was up 92% on the prior
year and our underlying net profit after
tax of $302 million was up 86% on the
prior year, and as an indication of how
far we have come, it is over 700% higher
than in FY16.
Beach benefited from a rising oil price
environment in FY18 recording a 36%
increase in our average realised oil price.
Beach has carefully constructed the
diversified revenue position it is now in
– with a material portion of production
supported by long term gas sales
agreements containing regular pricing
step ups and resets whilst maintaining
a meaningful exposure to oil price.
Notably, oil and gas liquids contributed
approximately 60% of Beach revenue
in the June quarter.
Complemented by higher sales
volumes, the increase in average
realised oil price drove the 92%
increase in our sales revenue which
in turn supported a 121% increase in
underlying EBITDA to $766 million.
A very strong result.
Field operating costs on a barrel of
oil equivalent basis increased with
the addition of the newly acquired
assets. Being a low-cost operator
is part of Beach’s culture, we have
commenced a campaign to lower
controllable costs through various
operational and drilling focussed
initiatives and continue to target
synergy savings. With cost reduction
and efficiency improvement
opportunities continuing to be
identified, we raised our synergy
and efficiencies target to $60 million
per annum by the end of FY19. Our
synergy run rate was $37 million per
annum at the end of FY18.
At the end of FY18 we find ourselves
in excellent financial shape. We
generated operating cash flow of
$663 million, a 108% increase over
the prior year, which in turn helped
to drive net gearing below 26% by
30 June, well ahead of our 30%
target announced 6 months ago.
As a reminder, we consolidated the
assets acquired from Lattice from
1 January 2018, so only 6 months
of Lattice is reflected in our FY18
results. FY19 will include a full
12 months.
Kupe Platform,
New Zealand
Annual Report 2018 11
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION CHIEF
EXECUTIVE
OFFICER’S
REPORT
CONTINUED
FY19 and beyond
With a foundation of strong operating
cash flows, balance sheet capacity and
supportive market dynamics, Beach
is now ready to accelerate growth to
underpin our medium term production
target of more than 30 MMboe by FY21.
We have commenced what we expect
to be a record investment year in FY19.
The reasons for this significant
investment are clear.
Beach has an expanded portfolio of
high quality investment opportunities.
A detailed review of the entire growth
portfolio was completed in H2 FY18,
yielding a list of highly value-accretive
investment opportunities.
Further, a significant proportion of our
investment is aimed at bringing new gas
supplies into the east coast gas market.
Prevailing market conditions are
supportive of investment. Oil prices are
above US$80 dollars a barrel at the
time of writing, however Beach is well
positioned to remain profitable in a low
oil price environment.
With these dynamics as a backdrop,
we believe the time is right to increase
disciplined growth investment. Higher
investment in a high returning portfolio
should lead to higher production and
higher cash flows, which in turn will lead
to the rapid pay down in debt, leaving
Beach in an even stronger financial
position in the future.
To conclude, we no longer think of
Beach as a combination of the former
Beach plus Lattice. With a diverse
geographic footprint, five production
hubs, significant gas processing
infrastructure, offshore and onshore
capabilities and over 300 MMboe of
2P reserves, we are truly a transformed
company, proud of our history and
focussed on the future, and encourage
you all to think of us the same way.
Matt Kay
Chief Executive Officer
5 October 2018
41%
COOPER
BASIN
FY18 BEACH 2P RESERVES
10%
TARANAKI
BASIN
3%
BASS
BASIN
313MMboe
24%
OTWAY
BASIN
23%
PERTH BASIN
SAFETY PERFORMANCE1
5.4
4.6
67%REDUCTION IN
LTIFR SINCE FY13
2.1
1.9
1.8
1.6
FY13 FY14 FY15
FY16
FY17
FY18
1.
Includes Lattice assets from 1 January 2018.
Callawonga facility,
Cooper Basin South Australia
Thylacine platform,
Otway Basin, Victoria
12 Beach Energy Limited | ABN 20 007 617 969
UNDERLYING EBITDA
$ million
766
121%
347
FY17 FY18
UNDERLYING NPAT
$ million
86%
302
162
36
FY16 FY17 FY18
Since FY13, we have seen a
67% reduction in time lost due
to injuries across the business,
and FY18 demonstrated the
least spilt volume of produced
hydrocarbons on record.”
BRETT DOHERTY,
GROUP EXECUTIVE HEALTH, SAFETY,
ENVIRONMENT AND RISK
Zero
CONTRACTOR LOST TIME
INJURIES FOR FY18
SYNERGY AND EFFICIENCY
TARGET INCREASED TO
$60M
PER ANNUM
Annual Report 2018 13
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REVIEW OF
OPERATIONS
A leading Australian upstream oil and gas operator
Beach organises itself into three
reporting segments:
§ SAWA – South Australia and Western
Australia;
§ Victoria; and
§ New Zealand
Operational highlights from FY18 are
summarised below. Further details are
contained later in this Annual Report
within the Directors’ Report.
Production
During the financial year, Beach acquired
the Lattice Energy Group, Benaris’
interest in the Otway Gas Project and
Toyota Tsusho Corporation’s interest in
the Otway Gas Project and the BassGas
project. The effective accounting
acquisition date was 1 January 2018.
Beach recorded annual production of
19.0 MMboe, up 80% from the prior year.
Gas and gas liquids production of
13.3 MMboe was 174% higher than the
prior year and accounted for 70% of
total production, while oil production
of 5.7 MMbbl was in line with the
prior year and accounted for 30%
of total production.
SAWA
Western Flank Oil
Western Flank oil operations accounted
for 25% of Beach’s FY18 production
and the majority of Beach’s FY18 oil
production. Producing permit areas
include ex PEL 91 (Beach 100%), ex PEL
92 (Beach 75% and operator, Cooper
Energy 25%) and ex PEL 104/111 (Beach
40%, Senex 60% and operator). Western
Flank net oil production was 4.7 MMbbl,
in line with the prior year.
Western Flank Gas
Western Flank gas operations accounted
for 7% of Beach’s FY18 production.
Producing permit areas include ex PEL
106 (Beach 100%), the Mokami Field in
ex PEL 91 (Beach 100%) and the Udacha
Block – PRL 26 (Beach 100%). Other
permits include PEL 630 (Beach 50%
and operator, Bridgeport 50%). Western
Flank net gas production was 1.4 MMboe,
a 46% increase over the prior year.
Cooper Basin JV
Beach’s wholly owned subsidiaries Delhi
Petroleum Pty Ltd and Lattice Energy
Limited own non-operated interests in
the South Australian Cooper Basin joint
ventures (collectively 33.40% in SA Unit
and 27.68% in Patchawarra East) and the
South West Queensland joint ventures
(various interests of 30% to 52.2%),
which are collectively referred to as the
Cooper Basin JV. Beach increased its
interests in the Cooper Basin JV via the
Lattice acquisition and consolidated the
associated increased interests from
1 January 2018.
The Cooper Basin JV operations
accounted for 31% of Beach’s FY18
production. Net gas and gas liquids
production of 5.1 MMboe was up 36%
from the prior year and comprised sales
gas of 4.2 MMboe (up 33%) and gas
liquids of 0.8 MMboe (up 55%). Net oil
production of 0.8 MMbbl was up 17%
on the prior year.
Other Cooper Basin
Other Cooper Basin represents
producing permit areas ATP 299
(Tintaburra) (Beach 40%, Santos 60%
and operator) and ex PEL 513/632
(Beach 40%, Santos 60% and operator).
Other permits include PEL 570 JV
(Beach 25%, Santos 75% and operator).
Production from Other Cooper Basin
producing permit areas was 0.2 MMboe,
down 35% from the prior year. Other
Cooper Basin accounted for 1% of
Beach’s total production.
Production
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
SAWA
Otway Basin
Bass Basin
Victoria
New Zealand
FY17
Oil Equivalent
(MMboe)
FY18
Oil (MMbbl)
Gas Liquids
(MMboe)
Gas (PJ)
Oil Equivalent
(MMboe)
Year-on year
change (%)
4.8
1.0
4.4
0.3
–
10.6
–
–
–
–
4.7
–
0.8
0.1
–
5.7
–
–
–
–
–
0.5
0.8
0.0
0.0
1.3
0.5
0.3
0.7
0.5
2.5
–
5.5
24.7
0.3
2.4
32.9
19.0
4.7
23.7
5.8
62.5
4.7
1.4
5.9
0.2
0.4
12.7
3.7
1.1
4.8
1.5
19.0
(1%)
46%
33%
(35%)
–
20%
–
–
–
–
80%
Total Production
10.6
5.7
14 Beach Energy Limited | ABN 20 007 617 969
Perth Basin
Perth Basin operations accounted
for 2% of Beach’s FY18 production.
Producing permit areas include
Waitsia (Beach 50%, Mitsui 50%
and operator) and Beharra Springs
(Beach 67% and operator, Mitsui 33%).
Beach acquired its interests in the
Perth Basin via the Lattice acquisition
and consolidated these interests
from 1 January 2018. Net Perth Basin
production was 0.4 MMboe.
Victoria
Otway Basin
Otway Basin operations accounted
for 19% of Beach’s FY18 production.
Producing licence areas include HBWS
(Beach 100%) and OGP (Beach 100%).
Beach consolidated 100% of HBWS
and OGP from 1 January 2018. Net
Otway Basin production in FY18 was
3.7 MMboe.
Bass Basin
Bass Basin operations accounted
for 6% of Beach’s FY18 production
and comprises the BassGas Project.
Beach acquired its interests in the
BassGas Project via the Lattice and
Toyota Tsusho acquisitions. Beach
consolidated these interests from
1 January 2018. Net Bass Basin
production in FY18 was 1.1 MMboe.
New Zealand
Taranaki Basin
Taranaki Basin operations accounted
for 8% of Beach’s FY18 production
and comprises Kupe (Beach 50%
and operator, Genesis 46%, NZOG
4%). Beach acquired its interest in
the Taranaki Basin via the Lattice
acquisition and consolidated this
interest from 1 January 2018. Net
Taranaki Basin production in FY18
was 1.5 MMboe.
We want to be the best at what we do, everywhere
we operate. Better safety and improved operational
reliability, combined with strong discipline in further
sustainable reductions in operating costs will deliver
strong performance and will continue to be our key focus.”
DAWN SUMMERS
CHIEF OPERATING OFFICER
Halladale drill site,
Otway Basin, Victoria
Annual Report 2018 15
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REVIEW OF
OPERATIONS
CONTINUED
Exploration and development
Beach participated in 96 wells at a success
rate of 82%. Drilling successes included:
§ Bauer-26 (ex PEL 91), Beach’s
first operated horizontal oil development well;
§ The Stunsail oil field development
(ex PEL 91) with McKinlay and Birkhead
horizontal wells;
§ The Marauder-1 oil discovery and the
Growler-15 horizontal development
well both drilled by Senex (ex PEL 104);
§ Five Western Flank operated gas exploration
wells (increasing to six, subsequent to
year-end);
§ Haselgrove-3 ST1 gas discovery in the
onshore Otway Basin (PPL 62); and
§ Numerous small scale appraisal and
exploration successes in the Cooper Basin JV
Reserves and resources
As at 30 June
2P Reserves
(MMboe)
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
4
11
36
90
145
66
66
77
93
93
86
74
70
75
313
16 Beach Energy Limited | ABN 20 007 617 969
Bass Gas Plant,
Victoria
EXCELLENT FY18
OPERATIONAL PERFORMANCE
96 WELLS DRILLED AT
A SUCCESS RATE OF
82%
ANNUAL REPORTED
PRODUCTION OF
19.0/MMboe
80%
Cooper Basin,
South Australia
FY18 Drilling summary
Category
Wells
Drilled
Successful
Wells1
Success
Rate
Cooper/Eromanga Basins
Oil – Exploration
Oil – Appraisal
Oil – Development
Gas – Exploration
Gas – Appraisal
Gas – Development
Total Cooper/Eromanga
Onshore Otway Basin
Gas – Exploration
Total wells drilled
6
16
21
18
13
21
95
1
96
3
14
20
10
10
21
78
1
79
50%
88%
95%
56%
77%
100%
82%
100%
82%
1.
Success defined as wells that have been cased and suspended as future producers/injectors
Cooper Basin,
South Australia
Beach introduced
horizontal oil
development drilling
to its repertoire in
FY18. A successfully
executed horizontal
well intersects a
greater stretch
of a producing
reservoir which can
lead to increased
production and
potentially superior
project returns.”
GEOFF BARKER
GROUP EXECUTIVE DEVELOPMENT
Annual Report 2018 17
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
REVIEW OF
OPERATIONS
CONTINUED
FY18 successful wells (Cooper and Eromanga basins)
EROMANGA BASIN
COOPER
BASIN
NORTH
SA
QLD
Ballera
Jackson
Bauer
Callawonga
Middleton
Lycium
Moomba
0
20
40
60
80 km
Gas well
Beach operated permit
Oil well
Facility
Beach non-operated permit
Cooper Basin JV
CE18-0119A
NSW
FY18 marked the
successful return to
exploration drilling
in the onshore Otway
Basin in south east
South Australia, with
the Haselgrove-3 Sawpit
discovery, as Beach
strives to bring new gas
supply to the Australian
southern and east coast
gas market.”
JEFFREY SCHRULL
GROUP EXECUTIVE
EXPLORATION AND APPRAISAL
Year
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Total
NUMBER OF WELLS1
DRILLING SUCCESS RATE
Exploration
Appraisal
Exploration
Appraisal
12
7
11
35
28
14
13
13
32
43
31
21
16
18
25
319
5
8
8
31
34
16
8
4
14
11
13
22
12
13
29
228
17%
14%
45%
34%
32%
64%
31%
54%
47%
60%
58%
52%
75%
44%
56%
48%
60%
100%
88%
81%
68%
75%
88%
100%
86%
82%
69%
82%
92%
85%
83%
80%
Total
30%
60%
63%
56%
52%
70%
53%
65%
59%
64%
61%
67%
82%
61%
70%
61%
18 Beach Energy Limited | ABN 20 007 617 969
1. Excludes coal seam drilling
2P RESERVES MORE THAN
QUADRUPLED
320% INCREASE IN 2P RESERVES TO
313MMboe
2P RESERVES LIFE
INCREASED TO
11 Years
RESERVES (NET)
Oil (MMbbl)
Gas and gas liquids (MMboe)
Total as at 30 June 2018 (MMboe)
Total as at 30 June 2017
Increase / (decrease)
1P
25
165
190
38
2P
42
272
313
75
3P
73
418
491
138
405%
320%
255%
DEVELOPED AND UNDEVELOPED RESERVES (NET)
Oil (MMbbl)
Gas and gas liquids (MMboe)
1P
19
84
Total as at 30 June 2018 (MMboe)
103
Total as at 30 June 2017
33
Developed
Undeveloped
2P
28
135
163
60
3P
46
214
259
106
1P
6
81
87
5
2P
13
137
150
14
3P
27
205
232
32
Increase / (decrease)
213%
171%
145% 1,735%
944%
615%
NB. All reserve and resource figures are quoted net of fuel; due to rounding, figures and
ratios may not reconcile to totals.
Beach 2C contingent resources
Net 2C contingent resources increased 35% to 207 MMboe. The table below
provides a summary.
2C CONTINGENT RESOURCES (NET)
Oil (MMbbl)
Conventional gas and gas liquids (MMboe)
Unconventional gas and gas liquids (MMboe)
Total (MMboe)
30-Jun-17
Revisions
30-Jun-18
29
86
38
153
2
65
(14)
54
31
152
24
207
Annual Report 2018 19
Notes on the reserves statement
Beach prepares its petroleum reserves
and contingent resources estimates
in accordance with the Petroleum
Resources Management System (PRMS)
published by the Society of Petroleum
Engineers. The reserves and contingent
resources presented in this report were
originally disclosed to the market in
ASX release #034/18 from 2 July 2018.
Beach confirms that it is not aware
of any new information or data that
materially affects the information
included in the aforesaid market
announcement and that all the
material assumptions and technical
parameters underpinning the estimates
in the aforesaid market announcement
continue to apply and have not
materially changed.
Conversion factors used to evaluate oil
equivalent quantities are sales gas and
ethane: 5.816 TJ per kboe, LPG: 1.389 bbl
per boe, condensate: 1.069 bbl per boe
and oil: 1 bbl per boe. The reference
point for reserves determination is the
custody transfer point for the products.
Reserves are stated net of fuel and third
party royalties.
Beach ended FY18 with 2P oil
and gas reserves 320% higher
than the prior year
Beach recorded an organic 2P reserves
replacement ratio of 368% for the
12 month period ended 30 June 2018,
with year-end 2P oil, gas and gas liquids
reserves 320% higher than the prior year.
Including the impact of acquisitions/
divestments, Beach recorded a
2P reserves replacement ratio in
FY18 of 938%.
Approximately one third of the
increase in 2P reserves was due to the
underlying performance of the assets
and exploration/appraisal success.
2P reserves life increased from
7 years at the end of FY17 to 11 years
at the end of FY18.
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REVIEW OF
OPERATIONS
CONTINUED
2P Reserves by segment (Reconciliation)
2P RESERVES (NET)
Revisions
2P
30-Jun-17
(MMboe)
FY18
Production
(MMboe)
Acquisitions/
Divestments
(MMboe)
Exploration /
Appraisal
(MMboe)
Other
Revisions
(MMboe)
2P
30-Jun-18
(MMboe)
Oil
(MMbbl)
Gas
(PJ)
LPG
(kt)
Condensate
(MMbbl)
Western
Flank Oil1
Western
Flank Gas2
Cooper
Basin JV3
Other
Cooper Basin4
Perth Basin5
SAWA
Otway Basin6
Bass Basin7
Victoria
Taranaki Basin
(New Zealand)8
Total 2P
Reserves
20
8
46
0
–
75
–
–
–
–
(5)
(1)
(7)
(0)
(1)
(14)
(9)
(2)
(11)
(3)
–
–
26
–
44
70
50
10
61
32
2
3
2
–
29
37
–
–
–
–
17
(1)
17
(0)
(0)
33
33
1
–
2
34
34
–
–
9
84
0
72
–
7
–
–
34
177
377
754
1
419
5
–
200
42
832
936
75
9
83
30
–
–
–
–
375
651
39
104
414
755
128
560
–
2
6
0
0
8
5
1
6
4
75
(28)
162
37
68
313
42
1,374
2,252
18
1. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator) and ex PEL 104/111 (Beach 40% interest, Senex
operator). 2P reserves of 34 MMboe as at 30 June 2018 is split 75% ex PEL 91, 17% ex PEL 92 and 8% ex PEL104/111. A mixture of probabilistic
and deterministic methodologies is applied.
2. Western Flank Gas comprises ex PEL 106 (Beach 100%), PRL 26 (Beach 100%) and the Mokami Field in ex PEL 91 (Beach 100%).
2P reserves of 9 MMboe as at 30 June 2018 is split 77% ex PEL 106, 18% PRL 26 and 5% ex PEL 91. A mixture of probabilistic and deterministic
methodologies applied.
3. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and 33.40% and the
South West Queensland joint ventures where Beach equity interests range from 30% to 52.20%. Deterministic methodology applied.
4. Includes ex PEL 513/632 (SWJV) (Beach 40%, Santos operator) and PRL 135 (Vanessa) (Beach 43% interest, Senex operator). Deterministic
methodology applied.
5. Perth Basin comprises Waitsia (Beach 50%, AWE operator) and Beharra Springs (Beach 67% and operator). A mixture of probabilistic and
deterministic methodologies applied.
6. Otway Basin comprises HBWS (Halladale, Black Watch, Speculant) (Beach 100%), Otway Gas Project (Beach 100%) and Haselgrove area (Beach
100%). 2P reserves of 75 MMboe as at 30 June 2018 is split 10% HBWS, 90% Otway Gas Project and 0% Haselgrove area. A mixture of probabilistic
and deterministic methodologies applied.
7. Bass Basin comprises BassGas producing permits (Beach 53.75% and operator) and BassGas exploration permits (Beach 50.25% and operator).
A mixture of probabilistic and deterministic methodologies applied.
8. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator). A mixture of probabilistic and deterministic methodologies applied.
20 Beach Energy Limited | ABN 20 007 617 969
2P Reserves by segment (Developed/Undeveloped)
2P RESERVES (NET)
Developed Reserves
Undeveloped Reserves
LPG
(kt)
Condensate
(MMbbl)
Oil
(MMbbl)
Total
(MMboe)
Gas
(PJ)
LPG
(kt)
Condensate
(MMbbl)
Oil
(MMbbl)
Total
(MMboe)
Gas
(PJ)
–
–
34
177
307
616
Western
Flank Oil1
Western
Flank Gas2
Cooper
Basin JV3
Other
Cooper basin4
1
Perth Basin5
89
4
–
SAWA
431
798
Otway Basin6
127
232
Bass Basin7
39
104
Victoria
165
336
Taranaki Basin
(New Zealand)8
Total 2P
Reserves
59
259
656
1,393
–
2
5
0
0
6
2
1
3
2
11
22
–
6
–
–
22
9
69
0
15
–
–
71
0
330
–
–
138
1
–
28
115
401
138
–
–
–
–
25
9
249
420
–
–
34
249
420
14
68
300
28
163
718
859
–
–
1
0
0
1
3
–
3
2
6
12
–
1
–
–
13
–
–
–
–
12
–
16
0
57
85
49
–
49
16
13
150
1. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator) and ex PEL 104/111 (Beach 40% interest, Senex
operator). 2P reserves of 34 MMboe as at 30 June 2018 is split 75% ex PEL 91, 17% ex PEL 92 and 8% ex PEL104/111. A mixture of probabilistic
and deterministic methodologies is applied.
2. Western Flank Gas comprises ex PEL 106 (Beach 100%), PRL 26 (Beach 100%) and the Mokami Field in ex PEL 91 (Beach 100%).
2P reserves of 9 MMboe as at 30 June 2018 is split 77% ex PEL 106, 18% PRL 26 and 5% ex PEL 91. A mixture of probabilistic and deterministic
methodologies applied.
3. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and 33.40% and
the South West Queensland joint ventures where Beach equity interests range from 30% to 52.20%. Deterministic methodology applied.
4. Includes ex PEL 513/632 (SWJV) (Beach 40%, Santos operator) and PRL 135 (Vanessa) (Beach 43% interest, Senex operator). Deterministic
methodology applied.
5. Perth Basin comprises Waitsia (Beach 50%, AWE operator) and Beharra Springs (Beach 67% and operator). A mixture of probabilistic and
deterministic methodologies applied.
6. Otway Basin comprises HBWS (Halladale, Black Watch, Speculant) (Beach 100%), Otway Gas Project (Beach 100%) and Haselgrove area
(Beach 100%). 2P reserves of 75 MMboe as at 30 June 2018 is split 10% HBWS, 90% Otway Gas Project and 0% Haselgrove area. A mixture
of probabilistic and deterministic methodologies applied.
7. Bass Basin comprises BassGas producing permits (Beach 53.75% and operator) and BassGas exploration permits (Beach 50.25% and
operator). A mixture of probabilistic and deterministic methodologies applied.
8. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator). A mixture of probabilistic and deterministic methodologies applied.
Annual Report 2018 21
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REVIEW OF
OPERATIONS
CONTINUED
1P Reserves by segment (Reconciliation)
1P RESERVES (NET)
Revisions
1P
30-Jun-17
(MMboe)
FY18
Production
(MMboe)
Acquisitions/
Divestments
(MMboe)
Exploration /
Appraisal
(MMboe)
Other
Revisions
(MMboe)
1P
30-Jun-18
(MMboe)
Oil
(MMbbl)
Gas
(PJ)
LPG
(kt)
Condensate
(MMbbl)
Western
Flank Oil1
Western
Flank Gas2
Cooper
Basin JV3
Other
Cooper Basin4
Perth Basin5
SAWA
Otway Basin6
Bass Basin7
Victoria
Taranaki Basin
(New Zealand)8
Total 1P
Reserves
9
3
25
0
–
38
–
–
–
–
(5)
(1)
(7)
(0)
(1)
(14)
(9)
(2)
(11)
(3)
–
–
11
–
22
33
30
7
36
20
2
1
1
–
23
27
–
–
–
–
16
0
13
0
1
30
30
2
33
1
22
3
43
0
45
22
–
4
–
–
–
13
–
70
195
385
1
263
3
–
114
25
472
458
51
7
58
18
–
–
–
–
258
450
30
82
288
532
74
324
38
(28)
90
27
64
190
25
834
1,313
–
1
3
0
0
4
3
1
4
3
11
1. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator) and ex PEL 104/111 (Beach 40% interest, Senex
operator). 1P reserves of 22 MMboe as at 30 June 2018 is split 75% ex PEL 91, 17% ex PEL 92 and 8% ex PEL104/111. A mixture of probabilistic and
deterministic methodologies is applied.
2. Western Flank Gas comprises ex PEL 106 (Beach 100%), PRL 26 (Beach 100%) and the Mokami Field in ex PEL 91 (Beach 100%). 1P
reserves of 3 MMboe as at 30 June 2018 is split 78% ex PEL 106, 14% PRL 26 and 9% ex PEL 91. A mixture of probabilistic and deterministic
methodologies applied.
3. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and 33.40% and the
South West Queensland joint ventures where Beach equity interests range from 30% to 52.20%. Deterministic methodology applied.
4. Includes ex PEL 513/632 (SWJV) (Beach 40%, Santos operator) and PRL 135 (Vanessa) (Beach 43% interest, Senex operator). Deterministic
methodology applied.
5. Perth Basin comprises Waitsia (Beach 50%, AWE operator) and Beharra Springs (Beach 67% and operator). A mixture of probabilistic and
deterministic methodologies applied.
6. Otway Basin comprises HBWS (Halladale, Black Watch, Speculant) (Beach 100%), Otway Gas Project (Beach 100%) and Penola Trough (Beach
70-100%). 1P reserves of 51 MMboe as at 30 June 2018 is split 8% HBWS, and 92% Otway Gas Project. A mixture of probabilistic and deterministic
methodologies applied.
7. Bass Basin comprises BassGas producing permits (Beach 53.75% and operator) and BassGas exploration permits (Beach 50.25% and operator).
A mixture of probabilistic and deterministic methodologies applied.
8. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator). A mixture of probabilistic and deterministic methodologies applied.
22 Beach Energy Limited | ABN 20 007 617 969
1P Reserves by segment (Reconciliation)
1P RESERVES (NET)
Developed Reserves
Undeveloped Reserves
Gas
(PJ)
LPG
(kt)
Condensate
(MMbbl)
Oil
(MMbbl)
Total
(MMboe)
Gas
(PJ)
LPG
(kt)
Condensate
(MMbbl)
Oil
(MMbbl)
Total
(MMboe)
Western
Flank Oil1
Western
Flank Gas2
Cooper
Basin JV3
–
13
–
70
164
329
Other
Cooper Basin4
Perth Basin5
1
66
3
–
SAWA
245
402
Otway Basin6
Bass Basin7
Victoria
88
30
118
169
82
251
Taranaki Basin
(New Zealand)8
46
200
–
1
3
0
0
3
1
1
2
1
16
–
3
–
–
19
–
–
–
–
16
3
37
0
11
67
18
7
24
11
–
–
30
0
196
227
170
–
–
–
55
0
–
56
281
–
170
281
28
123
–
–
1
0
0
1
2
–
2
1
6
–
0
–
–
6
–
–
–
–
Total 1P
Reserves
409
853
7
19
103
425
460
4
6
6
–
7
0
34
46
34
–
34
7
87
1. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator) and ex PEL 104/111 (Beach 40% interest, Senex
operator). 1P reserves of 22 MMboe as at 30 June 2018 is split 75% ex PEL 91, 17% ex PEL 92 and 8% ex PEL104/111. A mixture of probabilistic
and deterministic methodologies is applied.
2. Western Flank Gas comprises ex PEL 106 (Beach 100%), PRL 26 (Beach 100%) and the Mokami Field in ex PEL 91 (Beach 100%). 1P reserves
of 3 MMboe as at 30 June 2018 is split 78% ex PEL 106, 14% PRL 26 and 9% ex PEL 91. A mixture of probabilistic and deterministic
methodologies applied.
3. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and 33.40% and the
South West Queensland joint ventures where Beach equity interests range from 30% to 52.20%. Deterministic methodology applied.
4. Includes ex PEL 513/632 (SWJV) (Beach 40%, Santos operator) and PRL 135 (Vanessa) (Beach 43% interest, Senex operator). Deterministic
methodology applied.
5. Perth Basin comprises Waitsia (Beach 50%, AWE operator) and Beharra Springs (Beach 67% and operator). A mixture of probabilistic and
deterministic methodologies applied.
6. Otway Basin comprises HBWS (Halladale, Black Watch, Speculant) (Beach 100%), Otway Gas Project (Beach 100%) and Penola Trough (Beach
70-100%). 1P reserves of 51 MMboe as at 30 June 2018 is split 8% HBWS and 92% Otway Gas Project. A mixture of probabilistic and deterministic
methodologies applied.
7. Bass Basin comprises BassGas producing permits (Beach 53.75% and operator) and BassGas exploration permits (Beach 50.25% and operator).
A mixture of probabilistic and deterministic methodologies applied.
8. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator). A mixture of probabilistic and deterministic methodologies applied.
Annual Report 2018 23
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REVIEW OF
OPERATIONS
CONTINUED
2C Contingent Resources by Permit (by Product)
2C CONTINGENT RESOURCES
Western Flank Oil1
Western Flank Gas2
Cooper Basin JV3
Other Cooper Basin4
Perth Basin5
Otway Basin6
Bass Basin7
Taranaki Basin8
Bonaparte Basin9
Carnarvon Basin10
Browse Basin11
Total Conventional 2C Contingent Resources
Cooper Basin JV Unconventional12
Total 2C Contingent Resources
Oil (MMbbl)
Sales Gas &
Ethane (PJ)
Condensate
(MMbbl)
Total Oil
Equivalent
(MMboe)
6
–
15
11
–
–
–
–
–
–
–
31
0
31
–
7
202
41
186
100
104
11
112
–
–
762
132
894
–
2
6
1
0
0
11
1
1
–
–
21
1
22
6
3
55
19
32
17
29
3
20
–
–
183
24
207
1. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator) and ex PEL 104/111 (Beach 40% interest, Senex operator).
2. Western Flank Gas comprises ex PEL 106 (Beach 100%), PRL 26 (Beach 100%) and the Mokami Field in ex PEL 91 (Beach 100%).
3. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and 33.40% and the
South West Queensland joint ventures where Beach equity interests range from 30% to 52.20%.
4. Includes ex PEL 513/632 (SWJV) (Beach 40%, Santos operator) and PRL 135 (Vanessa) (Beach 43% interest, Senex operator).
5. Perth Basin comprises Waitsia (Beach 50%, AWE operator) and Beharra Springs (Beach 67% and operator).
6. Otway Basin comprises HBWS (Halladale, Black Watch, Speculant – Beach 100%), Otway Gas Project (Beach 100%) and Penola Trough
(Beach 70-100%).
7. Bass Basin comprises BassGas producing permits (Beach 53.75% and operator) and BassGas exploration permits (Beach 50.25% and operator).
8. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator).
9. Bonaparte Basin comprises the Petrel field (Beach 5%).
10. Carnarvon Basin comprises the Hurricane field (Beach 10%). In Q1 FY18 NOPTA approved the transfer of Beach’s interest in WA-48-R to an existing
joint venture partner.
11. Browse Basin comprises the Lasseter South and Burnside fields (Beach 7.339%).
12. Cooper Basin JV unconventional includes contingent resources classified as unconventional and comprises the South Australian Cooper Basin joint
ventures where Beach equity interests are 27.68% and 33.40% and the South West Queensland joint ventures where Beach equity interests range
from 20.76% to 45.00%.
24 Beach Energy Limited | ABN 20 007 617 969
2C Contingent Resources by Permit (Reconciliation)
2C CONTINGENT RESOURCES (NET, MMBOE)
Western Flank Oil1
Western Flank Gas2
Cooper Basin JV3
Other Cooper Basin4
Perth Basin5
Otway Basin6
Bass Basin7
Taranaki Basin8
Bonaparte Basin9
Carnarvon Basin10
Browse Basin11
Total 2C Contingent Resources
2C
30 June 2017
Acquisitions
Revisions /
Discoveries
2C
30 June 2018
9
3
108
21
–
1
–
–
–
1
11
153
–
–
73
–
83
25
21
4
10
–
–
217
(3)
–
(102)
(2)
(51)
(9)
7
(1)
10
(1)
(11)
(163)
6
3
79
19
32
17
29
3
20
0
0
207
1. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator) and ex PEL 104/111 (Beach 40% interest,
Senex operator).
2. Western Flank Gas comprises ex PEL 106 (Beach 100%), PRL 26 (Beach 100%) and the Mokami Field in ex PEL 91 (Beach 100%).
3. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and
33.40% and the South West Queensland joint ventures where Beach equity interests range from 30% to 52.20%.
4. Includes ex PEL 513/632 (SWJV) (Beach 40%, Santos operator) and PRL 135 (Vanessa) (Beach 43% interest, Senex operator).
5. Perth Basin comprises Waitsia (Beach 50%, AWE operator) and Beharra Springs (Beach 67% and operator).
6. Otway Basin comprises HBWS (Halladale, Black Watch, Speculant) (Beach 100%), Otway Gas Project (Beach 100%) and Penola Trough
(Beach 70-100%).
7. Bass Basin comprises BassGas producing permits (Beach 53.75% and operator) and BassGas exploration permits (Beach 50.25% and operator).
8. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator).
9. Bonaparte Basin comprises the Petrel field (Beach 5%).
10. Carnarvon Basin comprises the Hurricane field (Beach 10%). In Q1 FY18 NOPTA approved the transfer of Beach’s interest in
WA-48-R to an existing joint venture partner.
11. Browse Basin comprises the Lasseter South and Burnside fields (Beach 7.339%).
Annual Report 2018 25
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION SUSTAINABILITY
Our People
Our success is contingent upon a highly capable
workforce that seeks to continually improve
and reach new standards of performance
Health and Safety Performance
§ Zero heat-stress related illness in the field
§ Zero Lost Time Injuries for contractors
§ Maintaining strong safety performance following
Lattice integration
§ Completed process safety review for all assets
§ Completed full implementation of in-field driver
competency assessment
Workforce development and retention
§ Continued delivery of the ‘Leading for High
Performance’ program
§ Formed a new and expanded leadership team across
Australia and New Zealand to support Beach’s low-cost
and high-performance model
§ Introduced new Management Operating System (MoS),
incorporating new governance processes and reporting
across the organisation to drive organisational performance
§ Integrated the Lattice Energy Services organisation into
Beach, transforming the organisation structure, footprint,
capabilities, workforce composition and talent mix
For additional information on Beach’s health and safety performance,
workforce development initiatives, related data and case studies, please
refer to our 2018 Sustainability Report available on Beach’s website.
26 Beach Energy Limited | ABN 20 007 617 969
Economics
Our focus is on creating long-term sustainable
growth for our shareholders and the
communities in which we operate
Economic Performance
§ Underlying net profit after tax up 86% to $302 million
§ Operating cash flow up 108% to $663 million
§ 2P reserves increased by 320%
§ Total production increased by 80% to 19.0 MMboe
§ Liquidity of $761 million at 30 June 2018
§ Gas and gas liquids production increased by
174% to 13.3 MMboe
For additional information on Beach’s economic performance, related
data, and case studies please refer to our 2018 Sustainability Report
available on Beach’s website.
2P RESERVES
INCREASED BY
UNDERLYING
NPAT
320%
$302M
86%
Our Environment
As an oil and gas explorer and producer, we
recognise our responsibility to understand
and respect the environment we operate in,
to minimise our impact, and remediate areas
affected by past activities
Environmental Performance
§ Record-low produced hydrocarbon spills, 1 bbl
§ Offset 403 hectares of land, through financial contributions
to Witchelina Station reserve, which is run by Nature
Foundation SA
§ Completed review of the TCFD (Task Force on Climate-
related Financial Disclosures) Recommendations to enable
future implementation of these practices at Beach
§ Review of current waste segregation and disposal
practices, to help enable improved recycling and re-use
into the future
For additional information on Beach’s environmental performance,
related data, and case studies please refer to our 2018 Sustainability
Report available on Beach’s website.
Annual Report 2018 27
Cooper Basin,
South Australia
Our Communities
Beach’s long-term sustainability is contingent
upon maintaining strong and meaningful
relationships with the communities in which
we operate. As such, Beach seeks to create
and maintain long-term relationships that
ensure we make a positive contribution to
these communities
Community Performance
§ Won the Excellence in Community Partnership and
Engagement Award at the New Zealand Petroleum
Conference
§ Made a substantial financial grant to BlazeAid for equipment
and materials to support bush fire recovery for farmers in
Western Victoria
§ Sponsorship of a key community health education program
and solar heating of the community swimming pool in
Timboon, Victoria
§ Experiential learning for science and vocational students
at BassGas and the Otway Gas Plant
For additional information on community investments, related data
and case studies please refer to our 2018 Sustainability Report available
on Beach’s website.
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION COP21 Paris Agreement
The Paris Agreement in 2015 saw the world’s
governments come together and commit to a
mutual goal of preventing dangerous impacts
of climate change by limiting global warming
to below 2°C. The Paris Agreement sets in
place a framework for all countries to take
climate action from 2020, building on existing
international efforts in the period up to 2020.
Key outcomes include:
§ Limiting global temperature increase to well below
2 degrees Celsius, while pursuing efforts to limit the
increase to 1.5 degrees
§ All countries to prepare, communicate and maintain a
nationally determined contribution (NDC) and to pursue
domestic measures to achieve them.
§ Starting in 2023, all countries to communicate their NDCs
every 5 years and provide information necessary for
clarity and transparency
§ Financial, technological and capacity building support
to help developing countries implement the Agreement.
This is targeted at a minimum of US$100bn per year
from 2020-2025
SUSTAINABILITY
CONTINUED
Climate change
Beach Energy accepts climate change is a
significant social, environmental and business
issue. We support the Australian government’s
position to limit global warming to less than
two degrees Celsius above pre-industrial levels.
Beach, through its expanded natural gas portfolio, is well-
placed to play an important role in the transition to a low
carbon future. The acquisition of Lattice Energy this year
has further increased Beach’s exposure to the Australian
east coast gas market, and as of 30 June 2018, natural gas
accounted for 64%1 of Beach’s total hydrocarbon production.
Natural gas has a critical role in the transition to a lower
carbon economy. According to the International Energy
Agency, the emissions from natural gas combustion (per
unit of energy produced) are around 40% lower than coal2.
Furthermore, natural gas is the perfect partner for renewable
energy generation as it provides a flexible and responsive
energy source to provide balance to the electricity grid.
In addition, natural gas is used as a feedstock in the
manufacture of a wide range of industries including
fertilisers and plastics.
1. Represents combined sales gas and ethane production of Beach
and Lattice Energy. This number is provided for information
purposes only and should not be relied upon.
2. https://www.iea.org/newsroom/news/2017/october/commentary-
the-environmental-case-for-natural-gas.html
Cooper Basin,
South Australia
28 Beach Energy Limited | ABN 20 007 617 969
Domestic Demand for Gas
GAS CONSUMPTION ACTUAL AND FORECAST,
2010-2038, ALL SECTORS, NEUTRAL SCENARIO
According to the 2018 Australian Energy
Market Operator (AEMO) Gas Statement of
Opportunities (GSOO), Australia will continue
to maintain demand for natural gas over the
next 20 years.
Key takeaways include:
§ Declining forecast consumption in the early years
(2018-23), due to a decline in projected residential/
commercial consumption, due to energy efficiency gains
and gas to electric fuel switching as well as a forecast
decline in gas consumption from gas-powered generation
(GPG) of electricity, due to penetration of renewable
generation sources increasing at a rapid rate in the
National Electricity Market (NEM).
§ Consumption stabilising over the medium term of forecasts
(2024-28), due to projected ramp-up in LNG exports to
full LNG train utilisation to meet growing Asian demand,
offsetting a forecast continued decline in residential/
commercial consumption.
§ Forecast growing consumption of residential/commercial
sectors and GPG in the long term (2029-38), due to a
growth in connections as electric fuel switching plateaus
and GPG demand growing as it is expected to assist in
integrating renewable generation reliably and securely,
particularly as aging coal generators are forecast to retire.
2,500
2,000
1,500
1,000
500
0
2010
2015 2018 2020
2025
2030
2035
2038
Industrial
Residential and Commercial
GPG
LNG
Source: AEMO 2018 Gas Statement of Opportunities, June 2018
Task Force on Climate-
related Financial Disclosures
Beach recognises the potential impacts
of climate change on its business and the
importance of appropriate climate-related
disclosure for its stakeholders. Beach
is committed to ensuring appropriate
disclosure and in FY18, taking into account
the recommendations of the Task Force
on Climate-related Financial Disclosures
(TCFD), Beach undertook a climate change
disclosure review.
This review has helped Beach understand the gaps in
its current climate change disclosure practices and to
prepare for future disclosure and management of material
climate risks and opportunities of the global goal of
limiting global temperature increase to less than 2°C
above pre-industrial levels.
In FY19, Beach expects to make further progress in this
area, and will look to implement an overarching climate
strategy. This strategy will consider the development of
a climate change policy, reviewing board and committee
charters to help ensure appropriate documentation of
climate-related matters. Furthermore it will consider the
documentation of management’s responsibilities for climate
change matters as well as the ongoing assessment of
climate change risks and opportunities.
Other actions under consideration include the establishment
and documentation of time horizons for climate change
risk assessment, a review of climate risks and opportunities
to assess the impacts of and organisational responses
to material risks and opportunities, finalising scenario
modelling/analysis, as well as reviewing HSE risk standards
to ensure adequate consideration of climate impacts.
Annual Report 2018 29
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION BOARD OF
DIRECTORS
Glenn Davis
INDEPENDENT NON-EXECUTIVE
CHAIRMAN
LLB, BEc, FAICD
Mr Davis has practiced as a solicitor in
corporate and risk throughout Australia
for over 30 years initially in a national
firm and then a firm he founded. He
brings to the Board his expertise in the
execution of large transactions and his
expertise and experience in corporate
activity regulated by the Corporations
Act and ASX Limited. Mr Davis is a
director of ASX listed companies Monax
Mining Limited (since 2004) and a
former director of Marmota Energy
Limited (from 2007 to June 2015).
Mr Davis’s special responsibilities include
membership of the Remuneration and
Nomination Committee.
Mr Davis joined Beach on 6 July 2007
as a non-executive director. He was
appointed non-executive Deputy
Chairman in June 2009 and Chairman
in November 2012. He was last re-elected
to the Board on 10 November 2016.
Colin Beckett
INDEPENDENT NON-EXECUTIVE
DEPUTY CHAIRMAN
FIEA, MICE, GAICD
As an engineer with over 40 years’
experience in engineering design, project
management, commercial and gas
marketing, Mr Beckett offers a diverse
and complementary set of skills in a
range of technical disciplines. Mr Beckett
previously held senior executive
positions at Chevron Australia Pty Ltd,
most recently as the General Manager
responsible for the development of the
Gorgon LNG and domestic gas project,
being developed on Barrow Island
offshore Western Australia.
Mr Beckett read engineering at
Cambridge University and has a Master
of Arts (1975). He is currently the
Chancellor of Curtin University and
Western Power. He is a past Chairman
of Perth Airport Pty Ltd and also a
past Chairman and board member of
the Australian Petroleum Producers
and Explorers Association (APPEA).
In addition Mr Beckett is a past member
of the West Australian Scitech Board and
the Resources Sector Suppliers Advisory
Forum and a Fellow of the Australian
Institute of Engineers.
Mr Beckett’s special responsibilities
include chairmanship of the Remuneration
and Nomination Committee and
membership of the Risk, Corporate
Governance and Sustainability Committee.
He was appointed to the Board on
2 April 2015, last having been re-elected
to the Board on 23 November 2017.
Philip Bainbridge
INDEPENDENT NON-EXECUTIVE
DIRECTOR
BSc (Hons) Mechanical Engineering,
MAICD
Mr Bainbridge has extensive industry
experience having worked for the
BP Group for 23 years in a range of
petroleum engineering, development,
commercial and senior management
roles in the UK, Australia and USA.
From 2006, he has worked at Oil Search,
initially as Chief Operating Officer,
then Executive General Manager LNG,
responsible for all aspects of Oil Search’s
interests in the $19 billion PNG LNG
project, then EGM Growth responsible
for gas growth and exploration.
He is currently a non-executive chairman
of the PNG Sustainable Development
Program and a non-executive Chairman
of Sino Gas and Energy Holding. He was
formerly a non-executive director
of Drillsearch Energy Limited from
2013 to 2016.
Mr Bainbridge’s special responsibilities
include chairmanship of the Risk,
Corporate Governance and Sustainability
Committee. He was appointed by
the Board on 1 March 2016, last
having been elected to the Board
on 10 November 2016.
Jim McKerlie
INDEPENDENT NON-EXECUTIVE
DIRECTOR
BEc, Dip Fin Mgt, FCA FAICD
Mr McKerlie brings to the Board over
20 years’ experience as director and
chairman of public companies. He
is the current chairman of ELMO
Software Limited (since June 2017) and
is the former chairman of Drillsearch
Energy Limited (from 2008 to 2016),
and a director of Great Artesian Oil
and Gas, former chairman of Manalto
Limited (from 2016 to 2017), Lithium
Consolidated Minerals Exploration
Limited (2017), onthehouse Limited
(2010 to 2012) and Two Way TV (1999 to
2002). He is an experienced international
executive and Chartered Accountant with
appointments as a partner at KPMG and
Partner in Charge at Deloitte.
Mr McKerlie’s special responsibilities
include membership of the Audit
Committee. He was appointed to the
Board on 1 March 2016 following the
merger with Drillsearch and was last
elected to the Board on 10 November 2016.
Ryan Stokes
NON-EXECUTIVE DIRECTOR
BComm FAIM
Mr Stokes is the Managing Director and
Chief Executive Officer of Seven Group
Holdings Limited (SGH). SGH is a listed
diverse investment company involved in
Industrial Services, Media, and Energy.
SGH interests include 25.6% of Beach
Energy, WesTrac, Coates Hire and 41% of
Seven West Media Limited. Mr Stokes is a
director of WesTrac, Chairman of Coates
Hire, and a director of Seven West Media.
Mr Stokes is Chairman of the National
Gallery of Australia. He is also a member
of the Prime Ministerial Advisory Council
on Veterans’ Mental Health, a Committee
member of the innovationXchange
(within the Department of Foreign
Affairs and Trade), and a member of
the International Olympic Committee
Education Commission. His previous roles
include Chairman of the National Library
of Australia.
Mr Stokes is a member of the
Remuneration and Nomination Committee.
He was appointed by the Board on
20 July 2016, last having been re-elected
to the Board on 10 November 2016.
Richard Richards
NON-EXECUTIVE DIRECTOR
BComs/Law (Hons), LLM, MAppFin, CA,
Admitted Solicitor
Mr Richards is currently Chief Financial
Officer of Seven Group Holdings
Limited (SGH) (since October 2013).
He is responsible for Finance across the
diversified conglomerate (equipment
manufacture, sales and service,
equipment hire, investments, property,
media and oil and gas). Mr Richards is
a member of the Board of Directors of
WesTrac, SGH Energy, is a Director and
Chair of the Audit and Risk Committee
of Coates Hire Pty Limited, a Director and
30 Beach Energy Limited | ABN 20 007 617 969
Chair of the Audit and Risk Committee
of KU Children Services (NFP) and
a member of the Marcia Burgess
Foundation Committee (DGR). He had
held senior finance roles with Downer
EDI, the Lowy Family Group and Qantas.
Mr Richards is both a Chartered
Accountant and admitted solicitor with
over 30 years of experience in business
and complex financial structures,
corporate governance, risk management
and audit.
Mr Richards’ special responsibilities
include membership of the Audit
Committee, which he temporarily
chaired during a casual vacancy.
He was appointed to the Board on
4 February 2017 and then elected to
the Board on 23 November 2017.
Dr Peter Moore
INDEPENDENT NON-EXECUTIVE
DIRECTOR
PhD, BSc (Hons), MBA, GAICD
Dr Moore has over 35 years of oil and
gas industry experience. His career
commenced at the Geological Survey
of Western Australia, with subsequent
appointments at Delhi Petroleum Pty
Ltd, Esso Australia, ExxonMobil and
Woodside. Dr Moore joined Woodside
as Geological Manager in 1998 and
progressed through the roles of Head of
Evaluation, Exploration Manager Gulf of
Mexico, Manager Geoscience Technology
Organisation and Vice President
Exploration Australia. From 2009 to
2013, Dr Moore led Woodside’s global
exploration efforts as Executive Vice
President Exploration. In this capacity,
he was a member of Woodside’s
Executive Committee and Opportunities
Management Committee, a leader of its
Crisis Management Team, Head of the
Geoscience function and a director of ten
subsidiary companies. From 2014 to 2018,
Dr Moore was a Professor and Executive
Director of Strategic Engagement at
Curtin University’s Business School. He
has his own consulting company, Norris
Strategic Investments Pty Ltd. Dr Moore
is currently a non-executive director of
Central Petroleum Ltd (since 2014) and
Carnarvon Petroleum Ltd (since 2015).
Dr Moore’s special responsibilities include
membership of the Risk, Corporate
Governance and Sustainability Committee
and of the Renumeration and Nomination
Committee. Dr Moore was appointed by
the Board on 1 July 2017 and then elected
to the Board on 23 November 2017.
Joycelyn Morton
INDEPENDENT NON-EXECUTIVE
DIRECTOR
BEc, FCA, FCPA, FIPA, FGIA, FAICD
Ms Morton has more than 38 years’
experience in finance and taxation
having begun her career with Coopers &
Lybrand (now PwC), followed by senior
management roles with Woolworths
Limited and global leadership roles in
Australia and internationally within the
Shell Group of companies.
Ms Morton was National President of
both CPA Australia and Professions
Australia, has served on many committees
and councils in the private, government
and not-for-profit sectors and held
international advisory positions. She holds
a Bachelor of Economics degree from the
University of Sydney.
Her other current ASX listed board
positions are Argo Investments
Limited and Argo Global Listed
Infrastructure Limited. She is also
a non-executive director of
ASC Pty Ltd and Snowy Hydro
Limited. She has valuable board
experience across a range of
industries, including previous roles
as a non-executive director and
Chair of both Thorn Group Limited
and Noni B Limited and a non-
executive director of Crane Group
Limited, Count Financial Limited
and InvoCare Limited.
Ms Morton’s special responsibilities
include Chairmanship of the Audit
Committee. She was appointed a
non-executive director of Beach
Energy Limited on 21 February 2018.
Haselgrove-3 drilling,
Otway Basin, South Australia
Annual Report 2018 31
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION EXECUTIVE
TEAM
Matthew Kay
CHIEF EXECUTIVE OFFICER
BEc, MBA, FCPA, GAICD
Mr Kay joined Beach in May 2016
as Chief Executive Officer. Prior to
joining Beach, Mr Kay served as
Executive General Manager, Strategy
and Commercial at Oil Search, a
position he held for two years. In
that role he was a member of the
executive team and led the strategy,
commercial, supply chain, economics,
marketing, M&A and legal functions.
Prior to Oil Search, Mr Kay spent
12 years with Woodside Energy in
various leadership roles, including Vice
President of Corporate Development,
General Manager of Production
Planning leading over 80 operations
professionals, and General Manager
of Commercial for Middle East and
Africa. In these roles Mr Kay developed
extensive leadership skills across LNG,
pipeline gas and oil joint ventures,
and developments in Australia and
internationally.
Morné Engelbrecht
CHIEF FINANCIAL OFFICER
BCom (Hons), CA (ANZ & South
Africa), MAICD
Mr Engelbrecht joined Beach in
September 2016 as Chief Financial
Officer and is responsible for the
finance, tax, treasury, information
technology, contracts & procurement,
insurance and investor relations
functions. He is a Chartered
Accountant with more than 18 years’
experience including in the oil, gas
and resource sectors across various
jurisdictions including Australia, South
Africa, the United Kingdom, Papua
New Guinea and China. He held the
position of Chief Executive Officer of
ASX-listed company, Carbon Energy,
prior to his role with Beach. Prior
to this he held various financial,
commercial and advisory senior
management positions at InterOil,
Newcrest, Harmony Gold and PwC.
Mr Engelbrecht also has extensive
experience in strategy and planning,
capital management, debt and equity
markets, M&A and joint venture
management and operations.
Dawn Summers
CHIEF OPERATING OFFICER
BEng (Hons) (Chemical)
Ms Summers joined Beach in
January 2018 as Chief Operating
Officer and brings to Beach over
25 years of upstream and downstream,
international oil and gas experience.
Prior to joining Beach, Ms Summers
was Chief Operating Officer of Origin
Energy’s integrated gas division, with
operational responsibility for the
Lattice asset portfolio and Asia Pacific
LNG assets. Prior to this,
Ms Summers’ experience includes
two years on the executive team at
Genel Energy plc, an independent
exploration and production company
focused on Iraq and Africa, and
20 years with BP, ending up as
Global Vice President for Upstream
Production Operations and Safety
& Operational Risk.
Geoff Barker
GROUP EXECUTIVE DEVELOPMENT
BSc, MEng (Pet Eng)
Mr Barker joined Beach in
February 2018 as Group Executive
Development and brings to Beach
over 30 years of upstream oil and gas
experience. Prior to joining Beach,
Mr Barker was a Partner at leading oil
and gas consulting firm RISC where
he managed development and value
enhancement studies on a wide
range of onshore and offshore major
projects internationally and within
the Australasian region. Mr Barker
has held senior management and
technical positions in development
and operations at Woodside, Shell
and Bridge Oil.
32 Beach Energy Limited | ABN 20 007 617 969
Kupe Gas Plant and
Mount Taranaki, New Zealand
Lee Marshall
GROUP EXECUTIVE CORPORATE
STRATEGY AND COMMERCIAL
BE Commerce (Economics and Finance)
Mr Marshall joined Beach in
January 2018 as Group Executive
Corporate Strategy and Commercial.
Prior to joining Beach, Mr Marshall was
most recently General Manager UK for
Woodside Energy. Based in London,
Mr Marshall managed exploration assets
and business development opportunities
in the Atlantic Basin and Africa. He has
over 20 years of Australian and global
commercial, business development and
financial management experience across
upstream oil and gas and LNG.
Mr Marshall is responsible for upstream
commercial, strategy, economics, M&A,
business development and marketing.
Jeff Schrull
GROUP EXECUTIVE EXPLORATION
AND APPRAISAL
BSc Geophysics (Maths, Geology,
Physics), M.S Geophysics
Mr Schrull joined Beach in January
2017 in the position of Group Executive
Exploration and Development.
He brings to Beach over 30 years
of upstream oil and gas experience.
Prior to this, Mr Schrull held the
position of General Manager
Exploration and Production at Cue
Energy. He previously held several
senior international positions with
Chevron over a 19 year period, and
was subsequently at Addax Petroleum
in the role of Corporate General
Manager of Exploration. He has a
strong track record in creating and
delivering growth through exploration,
development, operations and M&A.
Brett Doherty
GROUP EXECUTIVE HEALTH,
SAFETY, ENVIRONMENT AND RISK
BEng (Electrical), LLB (Hons)
Mr Doherty joined Beach in
February 2018 as Group Executive
Health, Safety, Environment and Risk,
bringing over 30 years of upstream
oil and gas experience to Beach. His
career includes extensive exposure
to both offshore and onshore
development and operations. Prior
to Beach, Mr Doherty was General
Manager of Health, Safety and
Environment at INPEX Australia. He
has held several senior international
positions during his career, including
ten years as the Chief HSEQ Officer
at RasGas Company Limited, in the
State of Qatar.
Sheree Ford
GENERAL COUNSEL
BA, LLB, MBA
Ms Ford joined Beach in March 2018,
bringing over 25 years’ experience
as a corporate lawyer primarily in the
upstream oil and gas industry. Prior to
joining Beach Ms Ford worked for over
10 years as in house counsel at BHP
Billiton Limited, primarily in the oil and
gas business and was General Counsel
and Company Secretary at listed and
privately owned oil and gas companies
including InterOil Corporation, Oil
Search Limited and Roc Company
Limited. As well as extensive experience
in the upstream oil and gas business
across Australia, Asia, Africa and the
United Kingdom, Ms Ford has been
involved numerous large company
transactions including M&A.
Annual Report 2018 33
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION FULL YEAR
REPORT
Directors’ Report
Auditor’s Independence Declaration
2018 Remuneration in Brief (Unaudited)
Remuneration Report (Audited)
Directors’ Declaration
Full Year Financial Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Basis of preparation
Results for the year
1. Operating segments
2. Revenue and other income
3. Expenses
4. Employee benefits
5. Taxes
6. Earnings per share (EPS)
Capital employed
7. Inventories
8. Property, plant and equipment (PPE)
9. Petroleum assets
10. Exploration and evaluation assets
11. Interests in joint operations
12. Carrying value of oil and gas properties
13. Provisions
14. Commitments for expenditure
Financial and risk management
15. Finances and borrowings
16. Cash flow reconciliation
17. Financial risk management
Equity and group structure
18. Contributed equity
19. Reserves
20. Dividends
21. Subsidiaries
22. Deed of cross guarantee
23. Parent entity financial information
24. Related party disclosures
25. Disposal group held for sale
26. Business combination
Other information
27. Contingent liabilities
28. Remuneration of auditors
29. Subsequent events
Independent Auditor’s Report
Glossary of Terms
Schedule of Tenements
Shareholder Information
Corporate Information & Directory
34 Beach Energy Limited | ABN 20 007 617 969
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Your directors present their report for Beach Energy Limited (Beach or Company) on the consolidated accounts
for the financial year ended 30 June 2018. Beach is a company limited by shares that is incorporated and domiciled
in Australia.
The directors of the Company during the year ended 30 June 2018 and up to the date of this report are:
Surname
Bainbridge
Beckett
Bennett
Davis
McKerlie
Moore
Morton
Stokes
Richards
Other Names
Philip James
Colin David
Fiona Rosalyn Vivienne
Position
Independent non-executive director
Independent non-executive Deputy Chairman
Independent non-executive director 1
Glenn Stuart
James David
Peter Stanley
Joycelyn Cheryl
Ryan Kerry
Richard Joseph
Independent non-executive Chairman
Independent non-executive director
Independent non-executive director 2
Independent non-executive director 3
Non-executive director
Non-executive director
1. Retired on 23 November 2017
2. Appointed as a non-executive director on 1 July 2017
3. Appointed as a non-executive director on 21 February 2018
Directors Interests in shares, options and rights
The relevant interest of each director in the ordinary share capital of Beach at the date of this report is:
Shares held in Beach Energy Limited
Name
P J Bainbridge
C D Beckett
G S Davis
J D McKerlie
P S Moore
J C Morton
R K Stokes 3
R J Richards 3
Shares
Rights
118,090 2
65,914 1
153,226 2
124,840 2
22,500 2
50,000 1, 2
–
179,443 2
–
–
–
–
–
–
–
–
1. Held directly
2. Held by entities in which a relevant interest is held
3. Mr Stokes does not hold a relevant interest in Beach shares but he was nominated as a director by Beach’s largest shareholder
Seven Group Holdings Limited (SGH) and related corporations who collectively have a relevant interest in 25.58% of Beach shares. He is Managing
Director and Chief Executive Officer of SGH. Mr Richards was also nominated as a director by SGH. He is the Chief Financial Officer of SGH.
Details of the qualifications, experience, special responsibilities and meeting attendance of each of the directors are set
out later in the Directors’ Report.
Principal activities
Beach Energy is an ASX listed, oil and gas, exploration and production company headquartered in Adelaide, South
Australia. It has operated and non-operated, onshore and offshore, oil and gas production from five producing basins
across Australia and New Zealand and is a key supplier to the Australian east coast gas market. Beach’s asset portfolio
includes ownership interests in strategic oil and gas infrastructure, such as the Moomba processing facility and Otway Gas
Plant, as well as a suite of high potential exploration prospects. Beach is focused on maintaining the highest health, safety
and environmental standards.
Annual Report 2018 35
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Operating and Financial Review
The following operating results and events from FY18 are discussed in this Directors’ Report.
§ During the financial year, Beach acquired the Lattice Energy Group, Benaris’ interest in the Otway Gas Project and
Toyota Tsusho Corporation’s interest in the Otway Gas Project and the BassGas project. Beach acquired these interests
for $1,532 million in consideration with an effective accounting acquisition date of 1 January 2018.
§ To fund the acquisitions, Beach raised approximately $301 million through a 3 for 14 pro–rata accelerated non–renounceable
entitlement offer and entered into banking arrangements to access $1,475 million in credit facilities, including a $450 million
revolving credit facility.
§ At 30 June 2018 Beach reported net debt of $639 million versus $198 million net cash position as at 30 June 2017.
Net gearing decreased from less than 33% at the time of completion of the Lattice acquisition to less than 26% at
30 June 2018, primarily due to cash flow generation in H2 FY18. Beach ended FY18 with available liquidity of $761 million.
§ Beach recorded annual production of 19.0 MMboe, up 80% from the prior year.
§ Gas and gas liquids production of 13.3 MMboe was 174% higher than the prior year and accounted for 70% of
total production.
§ Oil production of 5.7 MMbbl was in line with the prior year and accounted for 30% of total production.
§ Capital expenditure (before acquisitions and divestments) of $288 million was 85% higher than the prior year as
Beach commenced its multi-year capital program in the Cooper Basin and expenditure increased with the expanded
asset portfolio.
§ Beach participated in 96 wells at a success rate of 82%, up from 58 wells at 79% in the prior year. Exploration and appraisal
wells accounted for 25% and 30% of total wells, respectively, with success rates of 56% and 83%, respectively.
§ Drilling successes included: 1) Bauer-26 (ex PEL 91), Beach’s first operated horizontal oil development well, 2) the Stunsail
oil field development (ex PEL 91) with McKinlay and Birkhead horizontal wells, 3) the Marauder-1 oil discovery and the
Growler-15 horizontal development well both drilled by Senex (ex PEL 104), 4) five Western Flank operated gas exploration
wells (increasing to six, subsequent to year-end), 5) Haselgrove-3 ST1 gas discovery in the onshore Otway Basin (PPL 62)
and 6) numerous small scale appraisal and exploration successes in the Cooper Basin JV.
§ Strong appraisal results at Waitsia in H1 FY18, with deliverability rates of 39, 50 and 90 MMscfd announced by the operator.
§ 2P oil and gas reserves were 313 MMboe at year-end, up 320% from the prior year. The recently acquired Lattice assets
were responsible for approximately two thirds of the increase in 2P reserves, with around one third due to positive reserve
revisions across existing Beach assets.
§ Net operating cash flow of $663 million was assisted by higher production and commodity prices, with Beach average
realised price, across all products, of $62.3/boe, up 14% from $54.8/boe in the prior year.
Beach reporting segments are:
§ SAWA – South Australia and Western Australia;
§ Victoria; and
§ New Zealand
Production summary
Production (net to Beach) 2
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
SAWA
Otway Basin
Bass Basin
Victoria
New Zealand
Total Production
FY17
Oil
Equivalent
(MMboe)
4.8
1.0
4.4
0.3
–
10.6
–
–
–
–
10.6
FY18
Oil
(MMbbl)
Gas Liquids
(MMboe)
Gas
(PJ)
Oil
Equivalent
(MMboe)
Year-on year
change (%)
4.7
–
0.8
0.1
–
5.7
–
–
–
–
5.7
–
0.5
0.8
0.0
0.0
1.3
0.5
0.3
0.7
0.5
2.5
–
5.5
24.7
0.3
2.4
32.9
19.0
4.7
23.7
5.8
62.5
4.7
1.4
5.9
0.2
0.4
12.7
3.7
1.1
4.8
1.5
19.0
(1%)
46%
33%
(35%)
–
20%
–
–
–
–
80%
1. See ASX Announcements from AWE Ltd (ASX: AWE) dated 22 November 2017, 10 November 2017 and 23 October 2017.
2. Due to rounding, figures may not reconcile to totals.
36 Beach Energy Limited | ABN 20 007 617 969
Drilling summary
Cooper / Eromanga Basins
Total Cooper/Eromanga
Onshore Otway Basin
Total wells drilled
Category
Oil – Exploration
Oil – Appraisal
Oil – Development
Gas – Exploration
Gas – Appraisal
Gas – Development
Gas – Exploration
1. Success defined as wells that have been cased and suspended as future producers / injectors.
Wells
Drilled
Successful
Wells 1
Success
Rate
6
16
21
18
13
21
95
1
96
3
14
20
10
10
21
78
1
79
50%
88%
95%
56%
77%
100%
82%
100%
82%
SAWA
Western Flank Oil
Western Flank oil operations accounted for 25% of
Beach’s FY18 production and the majority of Beach’s
FY18 oil production. Producing permit areas include ex
PEL 91 (Beach 100%), ex PEL 92 (Beach 75% and operator,
Cooper Energy 25%) and ex PEL 104/111 (Beach 40%,
Senex 60% and operator). Western Flank net oil production
was 4.7 MMbbl, in line with the prior year. The production
result benefited from the following activities, which almost
fully offset natural field decline.
§ Oil discovery: In July 2017, Beach announced a Birkhead
oil discovery in Senex-operated ex PEL 104 in the
Marauder Field, approximately two kilometres north of
the producing Growler and Spitfire oil fields. Marauder-1
was brought online in the first quarter.
§ Horizontal drilling: Horizontal drilling technology was
successfully introduced to the Western Flank in FY18.
Beach completed its first operated horizontal well,
Bauer-26. The well was drilled and brought online in less
than two months. Beach drilled a further two horizontal
oil development wells in the third quarter at Stunsail-6
and -7 as part of the Stunsail Field development
campaign. Senex also introduced horizontal drilling to its
operated acreage, with Growler-15 drilled and brought
online in February-March 2018.
§ New wells brought online: 18 oil wells were brought
online in FY18.
§ Production optimisation projects: Beach was very
active in the field throughout FY18. Artificial lift, which
included both beam pumps and electric submersible
pumps, was installed at 19 wells while debottlenecking
work was undertaken both in the flowline network
and via increase of fluid handling capability at various
facilities in ex PEL 91 and ex PEL 92.
Beach participated in 15 Western Flank oil wells in FY18;
four exploration wells, four appraisal wells and seven
development wells. The overall Western Flank oil drilling
success rate was 67%. At 30 June 2018, Western Flank 2P
oil reserves were 34 MMbbl, an increase of 14 MMbbl, net
of production, over the prior year.
Western Flank Gas
Western Flank gas operations accounted for 7% of Beach’s
FY18 production. Producing permit areas include ex PEL
106 (Beach 100%), the Mokami Field in ex PEL 91 (Beach
100%) and the Udacha Block – PRL 26 (Beach 100%).
Other permits include PEL 630 (Beach 50% and operator,
Bridgeport 50%). Western Flank net gas production
was 1.4 MMboe, a 46% increase over the prior year. The
production increase was the result of compression at
the Middleton facility, exploration success and new wells
brought online more than offsetting natural field decline.
§ Middleton compression: FY18 was the first full year
period to benefit from the expanded daily throughput
capacity of 25 MMscf raw gas at the Middleton facility.
As Beach executes on its strategic goal of increasing
its east coast gas business, further expansion of the
Middleton facility is being undertaken. Phase-one was
completed with a new gas export line commissioned on
30 June. Gas began being exported via the line into the
Santos network on 1 July 2018 and has allowed Western
Flank raw gas production to increase to between
35 – 38 MMscfd.
§ Gas exploration success: Beach drilled 11 wells of a
12-well, two-phase operated gas exploration campaign in
FY18. The 12-well campaign was completed subsequent
to year-end with an overall success rate of 50% and
two of the six successes being considered new field
discoveries.
§ New producing wells: Six gas wells were brought online
in FY18.
Beach participated in 11 Western Flank gas wells in FY18,
all of which were exploration wells, at a success rate of
45%. At 30 June 2018, Western Flank 2P gas reserves were
9 MMboe, an increase of 1 MMboe, net of production, over
the prior year.
Cooper Basin JV
Beach’s wholly owned subsidiaries Delhi Petroleum Pty Ltd
and Lattice Energy Limited own non-operated interests
in the South Australian Cooper Basin joint ventures
(collectively 33.40% in SA Unit and 27.68% in Patchawarra
East) and the South West Queensland joint ventures
(various interests of 30% to 52.2%), which are collectively
referred to as the Cooper Basin JV. Beach increased its
interests in the Cooper Basin JV via the Lattice acquisition
and consolidated the associated increased interests from
1 January 2018.
Annual Report 2018 37
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DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
The Cooper Basin JV operations accounted for 31% of Beach’s
FY18 production. Net gas and gas liquids production of
5.1 MMboe was up 36% from the prior year and comprised
sales gas of 4.2 MMboe (up 33%) and gas liquids of
0.8 MMboe (up 55%). Net oil production of 0.8 MMbbl was up
17% on the prior year. The production increase was the result
of Beach increasing its interests in the Cooper Basin JV as
well as an expanded drilling program and ongoing operating
efficiencies more than offsetting natural field decline.
§ Increased ownership interests: See section entitled
“Corporate activities – Acquisition of Lattice” which
discusses the acquisition of Lattice.
§ Expanded drilling program: The Cooper Basin JV
engaged a third drilling rig in the second quarter of FY18.
The third rig is a fit-for-purpose, shallow-well rig, designed
to reduce drilling times and allow smaller targets to be
potentially economic. Operating a third rig assisted the
Cooper Basin JV to drill 64 wells in FY18, double the 32
wells drilled in FY17.
§ Operating efficiencies: Drilling efficiencies from the
fit-for-purpose drill rig, faster rig move times and the
increased use of pad drilling in conjunction with high
drilling success rates, optimised completion strategies,
prioritisation of well connections and continued innovation
in field operations, such as the use of a dedicated truck
mounted workover rig to bring oil wells back online,
assisted the strong operating result.
Beach participated in 64 Cooper Basin JV wells, six gas
exploration, 13 gas appraisal, 21 gas development, two oil
exploration, eight oil appraisal and 14 oil development wells.
Highlights from the FY18 drilling program included:
§ Overall success rate of 91%.
§ 100% success rate in the six-well oil development
campaign in the McKinlay Field, which comprised four
horizontal wells and two vertical wells.
§ 100% success rate in the five-well gas and oil development
campaign in the Tirrawarra-Gooranie Field.
§ Horizontal wells in the Balcaminga and Tirrawarra fields
targeting gas and oil respectively.
At 30 June 2018, 2P oil and gas reserves were 84 MMboe, an
increase of 38 MMboe, net of production.
Other Cooper Basin
Other Cooper Basin represents producing permit areas ATP
299 (Tintaburra) (Beach 40%, Santos 60% and operator)
and ex PEL 513/632 (Beach 40%, Santos 60% and operator).
Other permits include PEL 570 JV (Beach 25%, Santos
75% and operator). Production from Other Cooper Basin
producing permit areas was 0.2 MMboe, down 35% from
the prior year. Other Cooper Basin accounted for 1% of
Beach’s total production. A four-well oil appraisal drilling
campaign was undertaken in ATP 299 (Tintaburra) during
FY18. The four wells were cased and suspended, three as
future producers and one as a water injector to assist with
future field production. A single deep coal gas exploration
well was drilled in PEL 570 JV and was cased and suspended
for future completion, fracture stimulation and flow testing.
At 30 June 2018, 2P oil and gas reserves were nominal.
South Australia Otway Basin
South Australia Otway Basin includes permits PPL 62 (Beach
100%) and PEL 494 (Beach 70% and operator, Cooper Energy
30%) in the Penola Trough. No production was recorded in
these permits in FY18. In the second quarter, Beach drilled
Haselgrove-3 ST1 targeting the Sawpit Sandstone and
shallower Pretty Hill Sandstone. On 11 January 2018, Beach
announced Haselgrove-3 ST1 as a new gas field discovery.
An initial production test was conducted from 10 February
to 14 March 2018, which confirmed gas deliverability and low
inert content (~5%) in the Sawpit Sandstone. Flow rates and
pressure data indicated that further appraisal was required to
assess resource size and commerciality of the Sawpit Sandstone
structure. Subsequent to year-end, Beach announced plans to
drill Haselgrove-4 (Beach 100%) to appraise the Haselgrove
Field, and exploration well Dombey-1 (Beach 70% and operator,
Cooper Energy 30%), to be drilled approximately 20km west
of Penola targeting the Pretty Hill and Sawpit sandstones.
As announced in December 2017, drilling of Dombey-1 will be
supported by the South Australian Government through a
$6.89 million PACE gas grant. The PACE gas grant scheme aims
to bring new gas to market by the end of 2020. In June 2018,
Beach accepted a $6 million Commonwealth Government GAP
grant to assist with the development of the Hazelgrove-3 project
to supply gas to the South Australian market. This in addition
to the South Australian Government PACE grant of $6 million
awarded in March 2017. Results of Haselgrove-4 and Dombey-1
will be incorporated into assessments of future commercial
options in the South Australia Otway Basin.
Perth Basin
Perth Basin operations accounted for 2% of Beach’s FY18
production. Producing permit areas include Waitsia (Beach
50%, Mitsui 50% and operator) and Beharra Springs (Beach
67% and operator, Mitsui 33%). Beach acquired its interests in
the Perth Basin via the Lattice acquisition and consolidated
these interests from 1 January 2018.
§ Waitsia: Beach acquired a 50% non-operated interest via
the Lattice acquisition. The project consists of the Waitsia
Gas Project, an interest in the Xyris production facility and
other in-field pipelines. Gas from two production wells is
processed at the Xyris gas processing facility at a rate of
~10 TJ/d (gross) and is sold to Alinta Energy under a gas
sales agreement.
§ Beharra Springs: Beach acquired a 67% operated interest
via the Lattice acquisition. The project consists of the
Beharra Springs, Redback Terrace and Tarantula gas
fields, and the Beharra Springs gas processing facilities.
Gas from nearby wells is processed at the Beharra
Springs gas processing facility and is sold to Western
Australia gas customers.
In H2 FY18, AWE Limited, the operator of Waitsia with a 50%
interest and 33% joint venture partner at Beharra Springs,
was acquired by Mitsui. Beach is working with Mitsui to
evaluate gas commercialisation opportunities and optimise
development plans for the Perth Basin.
Net Perth Basin production was 0.4 MMboe. At year-end,
Perth Basin 2P oil and gas reserves were 72 MMboe.
38 Beach Energy Limited | ABN 20 007 617 969
New Zealand
Taranaki Basin
Taranaki Basin operations accounted for 8% of Beach’s
FY18 production and comprises Kupe (Beach 50% and
operator, Genesis 46%, NZOG 4%). Beach acquired its
interest in the Taranaki Basin via the Lattice acquisition and
consolidated this interest from 1 January 2018. Net Taranaki
Basin production in FY18 was 1.5 MMboe. At 30 June 2018,
Taranaki Basin 2P oil and gas reserves were 30 MMboe.
Kupe produces gas from the Kupe Field, situated
approximately 30 kilometres off the New Zealand North
Island, in licence PML38146. Gas from Kupe is piped to an
onshore production station near Hawera (Kupe production
station). In FY18 gas from Kupe was sold to Genesis.
Corporate activities
Acquisition of Lattice and Toyota Tsusho interests
During the financial year, Beach acquired the Lattice
Energy Group, Benaris’ interest in the Otway Gas Project
and Toyota Tsusho interest in the Otway Gas Project and
the BassGas project. Beach acquired these interests for
$1,532 million in consideration with an effective accounting
acquisition date of 1 January 2018. The acquisitions were
funded from cash reserves, which included proceeds of the
entitlement offer as detailed below and the drawdown of
new debt facilities.
Entitlement offer
Beach raised approximately $301 million at an offer price
of $0.75 per share through a 3 for 14 pro-rata accelerated
non-renounceable entitlement offer to partially fund the
Lattice acquisition. On 2 October 2017, Beach announced
that the accelerated institutional entitlement offer had
been completed with a near record take-up rate of over
98%. On 19 October 2017, Beach announced that the retail
entitlement offer had been successfully completed and
was strongly supported by eligible shareholders. Pursuant
to the entitlement offer 401,543,843 new fully paid ordinary
shares were issued.
Victoria
Otway Basin
Otway Basin operations accounted for 19% of Beach’s FY18
production. Producing licence areas include HBWS (Beach
100%) and OGP (Beach 100%). Beach consolidated 100%
of HBWS and OGP from 1 January 2018. Net Otway Basin
production in FY18 was 3.7 MMboe. At 30 June 2018, Otway
Basin 2P oil and gas reserves were 75 MMboe.
§ HBWS: Beach acquired a 100% interest in the VIC/L1(v)
and VIC/P42(v) licences which contain the Halladale,
Black Watch and Speculant gas fields, via the Lattice
acquisition. HBWS produces gas from the Halladale
and Speculant gas fields via extended reach wells
drilled from an onshore location. Gas from both fields is
processed at the Otway Gas Plant. Beach is evaluating
options to develop the Black Watch gas field and drill
the Enterprise gas prospect via an extended reach well
drilled from an onshore location.
§ OGP: Beach acquired its 100% interest in OGP via the
Lattice Energy, Benaris and Toyota Tsusho interest with
effect from 1 January 2018. OGP produces gas from the
Geographe and Thylacine offshore gas fields situated
approximately 55 and 70 kilometres off the Victorian
coast, respectively, south of Port Campbell in licences
VIC/L23, T/L2 and T/L3. Gas is piped to shore and
processed at the Otway Gas Plant, near Port Campbell.
Beach is evaluating options to develop additional
reserves in the Geographe and Thylacine fields as well as
drilling the Artisan gas prospect.
Bass Basin
Bass Basin operations accounted for 6% of Beach’s
FY18 production and comprises the BassGas Project.
Beach acquired its interests in the BassGas Project
via the Lattice and Toyota Tsusho acquisitions. The
BassGas Project comprises the Yolla offshore gas field,
the BassGas pipeline and onshore Lang Lang gas plant
(Beach 53.75% and operator, Mitsui 35%, Prize Petroleum
International 11.25%), and various exploration permits
and retention licenses (Beach 50.25% and operator,
Mitsui 40%, Prize Petroleum International 9.75%). Beach
consolidated these interests from 1 January 2018. Net Bass
Basin production in FY18 was 1.1 MMboe. At 30 June 2018,
Bass Basin 2P oil and gas reserves were 9 MMboe.
The BassGas Project produces gas from the Yolla Field,
situated approximately 140 kilometres off the Gippsland
coast to the south of Orbost in production licence T/L1. Gas
from Yolla is piped to a gas processing facility located near
the township of Lang Lang approximately 70 kilometres
southeast of Melbourne. A wireline campaign conducted
on Yolla in H2 FY18 resulted in initial incremental gross
production of 4 – 5 TJ/d.
Annual Report 2018 39
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Beach and its wholly owned subsidiaries increased their ownership in the OGP and BassGas Project as set out in the
table below.
Summary of change in Beach interests in Otway Gas Project and BassGas Project
OGP
BassGas Project (producing assets)
Interest acquired
from Lattice
Interest acquired
from Toyota
95.00%
42.50%
5.00%
11.25%
Beach interest
effective post
transaction
100.00%
53.75%
New executive appointments and leadership structure
During the year, Beach announced new executive appointments and functional leadership structure, which followed an
extensive recruitment process. The appointments bring to Beach significant upstream oil and gas experience gained with
leading global energy companies and extensive offshore operations experience. Beach’s executive structure is summarised
below and further details and biographies are contained on the Beach website.
Beach Energy Executive Leadership Team as at 30 June 2018
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Group Executive Development
Group Executive Corporate Strategy and Commercial
Group Executive Exploration and Appraisal
Group Executive Health, Safety, Environment and Risk
Execution of North West Shelf farm-in and call option
agreements with Cue Energy
Beach entered into binding agreements with Cue Exploration
Pty Ltd, a 100% owned subsidiary of Cue Energy Limited
(ASX:CUE) to acquire interests in North West Shelf
exploration permits WA-359-P and WA-409-P in the
Carnarvon Basin, offshore Western Australia.
WA-359-P and WA-409-P are adjoining exploration permits
which contain the Ironbark gas-condensate prospect.
Ironbark is a Mungaroo Formation structural closure that
covers an area of approximately 400 square kilometres,
and is defined by high-quality 3D seismic data. The Ironbark
prospect is interpreted to have reservoirs of similar age
to nearby giant fields such as Gorgon and Goodwyn.
A discovery at Ironbark could result in a multi-Tcf gas field.
Beach will acquire a 21% equity interest in WA-359-P in
exchange for a one-off payment to Cue Energy of $900,000
for past costs, and future payments equating to 4% of
Cue Energy’s cost of drilling the Ironbark-1 exploration well
in the permit. The agreement is subject to the following
conditions precedent:
§ BP exercising its option to acquire a 42.5% equity
interest in WA-359-P. BP has until 25 October 2018
to exercise its option, unless extended. Refer to
announcements by Cue on 13 December 2017 and
17 April 2018 for further information.
§ Formation of a Joint Venture and associated Joint
Operating Agreement with full funding for the Ironbark-1
exploration well.
§ Permit holders obtaining an extension to the current
permit expiry date of 25 April 2018, to allow satisfactory
timing for planning and drilling of the Ironbark-1
exploration well.
§ Other terms, conditions and approvals customary for
transactions of this nature.
40 Beach Energy Limited | ABN 20 007 617 969
Matt Kay
Morné Engelbrecht
Dawn Summers
Geoff Barker
Lee Marshall
Jeffrey Schrull
Brett Doherty
In relation to WA-409-P, Beach has acquired for nominal
consideration a call option over a 7.5% equity interest in
the permit. If exercised, Beach will make future payments
equating to 7.5% of Cue Energy’s cost of drilling an
exploration well within the permit (timing to be confirmed),
and pay Cue Energy a 10% royalty on all future revenue
earned by Beach from the permit. The option may be
exercised until 31 July 2019. Further details are contained in
ASX release #088/17 from 29 November 2017.
New gas sales agreements with Adelaide Brighton
and Alinta Energy
Beach executed new GSAs with Adelaide Brighton Cement
Ltd, a wholly owned subsidiary of Adelaide Brighton Ltd
(ASX: ABC), and Alinta Energy Retail Sales Pty Ltd for the
supply ex-Moomba of processed sales gas from Beach’s
100% owned Western Flank acreage.
Under the terms of the GSAs, Beach will supply these
customers up to a total of 4 PJ of sales gas at pricing
reflective of current market conditions over an initial 12
month period commencing 1 January 2018. Associated LPG
and condensate production from Beach’s Western Flank
acreage will continue to be sold to the Cooper Basin JV.
Further details are contained in ASX release #089/17 from
5 December 2017.
Agreement with Senex to transfer free-carry
commitment to Western Flank oil assets
During Q4 FY18, Beach and Senex reached agreement to
transfer the remaining free-carry commitment on the joint
venture’s unconventional gas project to the Senex operated
Cooper Basin Western Flank oil assets. Beach’s acquisition
of Lattice included the commitment to free-carry Senex for
up to $43 million of investment, exploring for unconventional
gas in the Cooper Basin.
After negotiations with Senex, it has been agreed to
transfer the commitment of up to $43 million to
lower-risk, expected higher-return oil opportunities
in Western Flank permits ex PEL 104 and ex PEL 111
(Senex 60% and operator, Beach 40%).
The joint venture will commence an agreed work program in
early FY19 that includes at least three horizontal development
wells and seven exploration wells, and associated
infrastructure, over approximately 18 months. The former
Lattice earned interest in the unconventional gas acreage will
revert to Senex in full, subject to pre-emptive rights.
Director appointments and retirements
During the year, the following changes to Board
composition occurred:
§ Dr Peter Moore was appointed as an independent
non-executive director, with effect from 1 July 2017.
Dr Moore is a geologist with over 35 years of oil and
gas industry experience, including executive exploration
appointments with ExxonMobil and Woodside.
§ At the Annual General Meeting held 23 November 2017,
Ms Fiona Bennett retired from the Board of Directors.
§ On 22 February 2018, Beach announced the
appointment of Ms Joycelyn Morton as an
independent non-executive director, with effect from
21 February 2018. She was also appointed chair of the
Audit Committee. Ms Morton has an extensive business
and accounting background with over 38 years of
accounting and finance experience, including global
leadership roles in Australia and internationally within
the Shell Group of companies.
Reserves (net)
Oil (million barrels MMbbl)
Gas and gas liquids (million barrels of oil equivalent MMboe)
Total as at 30 June 2018 (MMboe)
Total as at 30 June 2017
Increase / (decrease)
At 30 June 2018, the Board comprises eight directors.
The approved maximum number of directors is nine.
Change of external auditor
On 22 January 2018, Beach announced the appointment
of Ernst & Young as auditor to Beach. The appointment
followed the outcome of a tender process and
resignation of KPMG.
Reserves and resources
Details and disclosures in relation to Beach’s reserves
and resources as at 30 June 2018 are contained in ASX
release #034/18 from 2 July 2018. An extract of this
announcement is provided below. 1P, 2P and 3P reserves
were independently audited by RISC Advisory. No new
information has subsequently come to hand which would
materially alter estimates or underlying assumptions.
On 2 July 2018 Beach reported in relation to its reserves and
contingent resources as at 30 June 2018. Highlights included:
§ 1P reserves increased by 152 MMboe (+405%) to 190 MMboe
§ 2P reserves increased by 239 MMboe (+320%) to
313 MMboe
§ Beach ‘pre-Lattice acquisition’ assets 1 2P reserves
increased from 75 to 95 MMboe
§ Lattice acquired assets1 2P reserves increased from
158 to 218 MMboe
§ Organic 2P reserves replacement ratio 2 of 368%
§ 2P reserves life 2 has increased from 7 years at the end
of FY17 to 11 years at the end of FY18
Reserves and resources as at 30 June 2018 are
summarised below.
1P
25
165
190
38
2P
42
272
313
75
3P
73
418
491
138
405%
320%
255%
DEVELOPED
UNDEVELOPED
Developed and undeveloped reserves (net)
Oil (MMbbl)
Gas and gas liquids (MMboe)
Total as at 30 June 2018 (MMboe)
Total as at 30 June 2017
Increase / (decrease)
1P
19
84
103
33
213%
2P
28
135
163
60
171%
3P
46
214
259
106
1P
6
81
87
5
2P
13
137
150
14
145%
1,735%
944%
3P
27
205
232
32
615%
2C Contingent Resources (Net)
Oil (MMbbl)
Conventional gas and gas liquids (MMboe)
Unconventional gas and gas liquids (MMboe)
Total (MMboe)
30-Jun-17
Revisions
30-Jun-18
29
86
38
153
2
65
(14)
54
31
152
24
207
NB. All reserve and resource figures are quoted net of fuel; due to rounding, figures and ratios may not reconcile to totals.
1. Beach ‘pre-Lattice acquisition’ assets refers to the Cooper Basin assets ex PEL 91, ex PEL 92, ex PEL 104/111, Tintaburra, ex PEL 106, ex PEL 513/632,
PRL 135 (Vanessa) and interests in the Cooper Basin JV which range from 12.86 to 40.00%. Lattice acquired assets refers to the OGP and HBWS in
the Otway Basin, BassGas Project, Waitsia, Beharra Springs, Kupe Gas Project and various interests from 7.9 to 27.0% in the Cooper Basin JV.
2. Please refer to ASX Release #034/18 from 2 July 2018 for calculation definitions.
Annual Report 2018 41
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Group profit attributable to equity holders of Beach
2018
$ million
198.8
2017
$ million
387.5
Financial results from FY18 are summarised below:
§ Sales revenue was up 92% from FY17 to $1,251 million due to higher sales volumes with the acquisition of Lattice as well
as higher prices.
§ Cost of sales were up 67% from FY17 to $774 million, mainly as a result of the acquisition of Lattice with higher operating
costs, royalties, depreciation and third party purchases, partly offset by lower inventory.
§ A net profit after tax of $199 million was reported, as a strong underlying operating performance was offset by impairment
charges and acquisition and integration costs.
§ Other expenses were $198 million including impairment expense on exploration assets of $87 million and acquisition and
integration costs of $50 million compared to the prior year which included net impairment reversals of $109 million.
Key Results
Operations
Production
Sales
Capital expenditure
Income
Sales revenue
Total revenue
Cost of sales
Gross profit
Other income
Net profit after tax (NPAT)
Underlying NPAT *
Dividends paid
Dividends announced
Basic EPS
Underlying EPS *
Cash flows
Operating cash flow
Investing cash flow
Financial position
Net assets
Cash balance
MMboe
MMboe
19.0
20.1
$m
(288.5)
2018
2017
Change %
10.6
11.8
(156.1)
652.6
665.7
(463.4)
189.2
52.6
387.5
161.7
1.50
1.00
20.38
8.50
80%
70%
(85%)
92%
90%
(67%)
152%
(54%)
(49%)
86%
33%
–
(55%)
63%
1,250.8
1,267.4
(773.8)
477.0
24.1
198.8
301.5
2.00
1.00
9.16
13.89
662.9
(1,730.7)
319.0
(152.0)
108%
(1,039%)
1,838.0
311.2
1,402.0
348.0
31%
(11%)
$m
$m
$m
$m
$m
$m
$m
cps
cps
cps
cps
$m
$m
$m
$m
* Underlying results in the table above are categorised as non-IFRS financial information provided to assist readers to better understand the financial
performance of the underlying operating business. They have not been subject to audit or review by Beach’s external auditors. Please refer to the
table on page 44 for a reconciliation of this information to the financial report.
42 Beach Energy Limited | ABN 20 007 617 969
Revenue
Higher oil and gas sales volumes driven by the Lattice acquisition and higher prices and third party sales in FY18 contributed
to a 92% increase in sales revenue to $1,251 million ($653 million in FY17). A higher average A$/US$ exchange rate partly
offset this increase. Sales revenue from production increased by $561 million and third party sales increased by $37 million.
Sales volumes of 20.1 MMboe were 70% higher than FY17 due to higher gas production and gas sales volumes driven by the
Lattice acquisition, and higher third party volumes. The average realised oil price increased to A$93/bbl, up A$25/bbl from
FY17, due to a higher US$ oil price, but was partly offset by an increase in the average A$/US$ exchange rate.
Sales Revenue Comparison ($m)
1,500
1,200
900
600
300
0
207.1
38.7
37.2
20.1
1,250.8
335.3
652.6
Volume/mix
Oil and
liquids prices
US$/boe
FY17 $52
FY18 $70
Gas/ethane
prices
A$/GJ
FY17 $6.07
FY18 $6.57
Third party
sales
FX rates
A$/US$
FY17 $0.755
FY18 $0.775
92%
$598.2 million
total increase
FY17
Average price
A$55.10/boe
FY18
Average price
A$62.26/boe
Gross Profit
Gross profit for the full year of $477 million (FY17 $189 million) was up 152%. The increase in gross profit was primarily
due to higher sales revenue driven by the Lattice acquisition partly offset by higher total cost of sales which were
up 67% from FY17 to $774 million. The increase in cost of sales is principally due to the Lattice acquisition with
higher cash production costs ($139 million), higher depreciation and amortisation ($143 million) and higher third
party purchases ($39 million), partly offset by a decrease in inventory charges ($11 million). Cash production costs
were up $139 million (59%), reflecting higher operating costs and higher royalties from the increase in production
and prices. Higher depreciation and amortisation charges were mainly due to increases in production driven by the
Lattice acquisition. Third party oil and gas purchases increased due to increased volumes. The decrease in inventory
charges primarily reflects timing of shipments and drawdown of gas from storage. Key movements in gross profit are
summarised below:
Gross Profit Comparison ($m)
800
700
600
500
400
300
200
100
0
598.2
11.2
39.4
138.9
Inventory
Third party
purchases
143.3
Cash
production
costs
477.0
Depreciation
Sales Revenue
189.2
FY17
152%
$287.8 million
total increase
FY18
Net profit after tax (NPAT)
Other income of $24 million was down $29 million from FY17. FY18 other income includes a gain of $15 million on the
settlement of a restoration obligation, and a gain of $5 million on the sale of investments. FY17 other income included
a gain on the sale of Beach Egypt ($47 million).
Other expenses for FY18 of $198 million, included impairment expense on exploration assets of $87 million and acquisition
and integration costs of $50 million compared to the prior year which included net impairment reversals of $109 million.
The reported net profit after tax of $199 million is $189 million lower than FY17, primarily due to increased impairment
charges and acquisition and integration costs.
Annual Report 2018 43
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Underlying NPAT
By adjusting FY18 NPAT to exclude impairment and non-recurring items (as summarised below), underlying NPAT was
$302 million. This represents an 86% increase on FY17, due mainly to higher production and prices.
Comparison of underlying profit
Net profit after tax
Adjusted for:
Acquisition, integration and debt cancellation costs
Gain on asset sales
Unrealised hedging movements
Gain on settlement of restoration obligation
Other non-recurring items
Impairment (reversal)/loss of assets
DTA recognition
Tax impact of above changes
Provision for international taxes
Underlying net profit after tax*
2018
$m
2017
$m
Movement
from PCP
$m
198.8
387.5
(188.7)
(49%)
51.4
(5.3)
13.2
(15.0)
–
88.3
–
(33.7)
3.8
301.5
–
(52.0)
3.7
–
10.4
(108.6)
(79.3)
–
–
161.7
51.4
46.7
9.5
(15.0)
(10.4)
196.9
79.3
(33.7)
3.8
139.8
86%
* Underlying results in this report are categorised as non-IFRS financial information provided to assist readers to better understand the financial
performance of the underlying operating business. They have not been subject to audit or review by Beach’s external auditors. All of the items
being adjusted pre-tax are separately identified within Notes 2(b), 3(b) and 15 to the financial statements.
Underlying Net Profit After Tax Comparison ($m)
500
400
300
200
161.7
100
0
FY17
277.4
1.3
21.3
Other
expenses
and revenue
Net financing
costs
115.0
Tax
Gross profit
86%
$139.8 million
total increase
301.5
FY18
44 Beach Energy Limited | ABN 20 007 617 969
Financial Position
Assets
Total assets increased by $2,184 million to $4,077 million.
Cash balances decreased by $37 million to $311 million, primarily due to acquisition of Lattice and Toyota $1,453 million
and capital expenditure partly offset by cash flow from operations of $663 million and cash flow from financing
activities of $1,030 million.
Receivables increased by $158 million primarily due to higher trade receivables and sales accruals with the acquisition
of Lattice. Inventories also increased $44 million due to the acquisition of Lattice. Derivative financial instruments
assets increased by $18 million due to the rising oil price. Available for Sale (AFS) financial assets decreased by
$44 million due to the sale of the Cooper Energy Limited investment. Assets held for sale have increased by
$20 million mainly due to the recognition of the corporate head office building as held for sale.
Fixed assets, petroleum and exploration assets increased by $1,953 million. This comprised the acquisition of
Lattice and Toyota assets of $2,031 million, capital expenditure of $288 million, and increases in restoration assets
of $56 million partly offset by amortisation and depreciation of $315 million, impairment charges of $88 million and
reclassifications of assets to held for sale of $21 million.
Goodwill of $84 million was recognised on the Lattice and Toyota acquisitions.
Deferred tax assets (DTA) decreased by $11 million following the acquisition of Lattice.
Liabilities
Total liabilities increased by $1,748 million to $2,239 million, mainly due to increased borrowings of $778 million, higher
payables of $245 million, restoration provisions of $530 million and employee provisions of $11 million driven by the
Lattice acquisition, an increase in tax liabilities of $136 million and an increase in derivative financial instruments
liabilities of $47 million due to the rising oil price.
Equity
Equity increased by $436 million, mainly due to the equity raising of $301 million and the net profit after tax of
$199 million, partly offset by dividends paid during the year of $42 million and a decrease in other reserves of
$22 million. Available for sale reserve reduced by $15 million due to the sale of the investment in Cooper Energy Limited
and the hedging reserve decreased by $10 million due to negative mark-to-market movements on the crude oil
derivatives designated as cash flow hedges.
Dividends
During the financial year the Company paid an FY17 fully franked final dividend of 1.0 cent per share as well as an
interim FY18 fully franked dividend of 1.0 cent per share. The Company will also pay an FY18 fully franked final dividend
of 1.0 cent per share from the profit distribution reserve.
State of affairs
In the opinion of the directors, other than the effect of the movement in oil prices summarised below, there were
no significant changes in the state of affairs of the Group that occurred during the financial year under review not
disclosed elsewhere in the Directors’ Report.
Oil prices
The average A$ realised oil price for FY18 increased 36% from the average price received in FY17.
Matters arising subsequent to the end of the financial year
There has not arisen in the interval between 30 June 2018 and up to the date of this report, any item, transaction or
event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the operations of the
Group. the results of those operations or the state of affairs of the Group in subsequent financial years, unless otherwise
noted in the Financial Report.
Annual Report 2018 45
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Future developments
Our strategy
Beach’s strategy is premised on its Vision: We aim to be Australia’s premier multi-basin upstream oil and gas company, and
its Purpose: To deliver sustainable growth in shareholder value. To achieve these goals, four strategic pillars drive all decision
making and serve as a roadmap for the future. The strategic pillars are:
1. Optimise our core in the Cooper Basin.
2. Build a complementary gas business in east coast basins.
3. Pursue compatible growth opportunities in Australia and nearby.
4. Maintain financial strength.
FY18 was transformational for Beach, headlined by the Lattice acquisition which was a unique fit against all of the strategic
pillars. The table below summarises progress made against each strategic pillar during the year.
Objectives
FY18 Progress
Pillar 1
Drive growth in Beach’s core
business through organic and
inorganic opportunities
✓ Cooper Basin production increased to 12.3 MMboe
✓ Cooper Basin 2P oil and gas reserves increased 71% to 128 MMboe at
30 June 2018
✓ 14 MMbbl of 2P oil reserves added in the Western Flank driven by successful
application of horizontal drilling technology and continued excellent production
at the Bauer oil field
✓ Broad ranging operating and cost efficiencies including the introduction of the
fit-for-purpose shallow-well drill rig in the Cooper Basin JV
✓ Completion of major infrastructure expansion projects such as the phase-one
expansion of the Middleton facility to 40 MMScfd raw gas capacity
✓ Addition of a third Cooper Basin JV drill rig and focus on faster drill times saw
participation in 96 wells, up from 58 in FY17
✓ Beach now supplies approximately 15 per cent of the east coast domestic
gas demand
✓ Lattice acquisition adds an expanded development and exploration
opportunity set
✓ GSAs in place with attractive price and structure: annual step-ups and CPI
adjustments and market price resets every 3-4 years
✓ Lattice acquisition was a unique fit against all of Beach’s strategic pillars and
acquired at an opportune time in the cycle
✓ Beach moved to strategic 100% ownership of the Otway Basin assets and
commenced a process for the proposed sell down of these assets
✓ Frontier exploration opportunities in three basins
✓ Agreed potential farm-in to Ironbark exploration prospect in the
Carnarvon Basin, WA
✓ $301 million entitlement offer undertaken
✓ Arranged $1,475 in credit facilities, including $450 million revolving credit facility
✓ Net drawn debt reduced by $221 million since financial close of Lattice
acquisition to $639 million at 30 June
✓ Net gearing ratio under 26% is well ahead initial targets
✓ Available liquidity of $761 million at 30 June 2018
✓ Free cash flow of $349 million generated in FY18
✓ Interim plus final dividend of 2.0 cents per share
Pillar 2
Pillar 3
Pillar 4
Establish a gas business in
east coast basins to benefit
from increasing gas demand
from east coast markets
A disciplined approach
to mature the current
opportunity set, identify
prospective basins and
execute growth opportunities
Maintain financial strength
to underpin exploration
efforts and growth options,
and support the objective
of sustainable growth in
shareholder value
Beach has made tangible progress against its four pillar strategy since its implementation in August 2015. In light of the
transformative Lattice acquisition, the Beach strategy is being assessed in the context of the new enlarged organisation.
46 Beach Energy Limited | ABN 20 007 617 969
FY19 outlook
FY19 capital expenditure guidance
FY19 capital expenditure is expected to be within the range of $460 – 540 million. The expanded capital program is
designed to develop undeveloped reserves and delineate additional reserves via appraisal and exploration.
Approximately 80% of expected FY19 capital expenditure is discretionary in nature and will only be spent in accordance
with strict investment hurdles and return requirements. Exploration and appraisal expenditure represents approximately
one third of Beach’s FY19 discretionary expenditure budget.
The remaining FY19 capital expenditure is stay-in-business and committed expenditure (fixed expenditure). This is
required expenditure on existing assets for purposes such as maintenance, regulatory commitments and contractual
obligations. A more detailed breakdown of our FY19 capital expenditure guidance range is provided below.
Key highlights include:
§ Participation in up to 133 wells (+39% from FY18), including up to 64 exploration and appraisal wells (+19% from FY18).
§ Participation in up to 87 Cooper Basin JV wells (+36% from FY18), with up to 65 wells targeting gas and 22 oil.
§ Participation in up to 43 Western Flank wells, with 35 targeting oil. Of the oil wells, Beach expects to participate in the
drilling of up to 15 horizontal wells.
§ Participation in two wells in the South Australia Otway Basin (Haselgrove-4 and Dombey-1), as well as early expenditure
on a gas processing facility at Haselgrove.
§ Drilling of Black Watch gas development well in Victoria Otway Basin (onshore-to-offshore).
§ Investing in long lead items ahead of further Victoria Otway Basin exploration and development drilling post FY19
(Enterprise, Artisan, Geographe/Thylacine).
FY19 capital expenditure split
Discretionary expenditure target
FY19 capital expenditure by assets group
19%
28%
8%
30%
53%
Fixed
Development
Exploration/appraisal
62%
Oil
East Coast Gas
Other
3%
6%
33%
17%
9%
34%
Cooper Basin JV
Western Flank
SA Otway
Victoria
WA
Other
Annual Report 2018 47
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Summary of FY19 drilling programme
The table below summarises the number of wells Beach expects to participate in during FY19 versus wells drilled in FY18.
Actual or forecast number of wells drilled
Cooper Basin JV
Western Flank
Other Cooper Basin
Total Cooper Basin
South Australia Otway Basin
Victoria (Otway and Bass Basins)
Western Australia
Beach Total
FY18
FY19
Gas
40
11
1
52
1
0
0
53
Oil
24
15
4
43
0
0
0
43
Total
Gas
64
26
5
95
1
0
0
96
65
8
0
73
2
1
0
76
Oil
22
35
0
57
0
0
0
57
Total
87
43
0
130
2
1
0
133
FY19 production guidance
FY19 production volumes are expected to be within the range of 26.0 – 28.0 MMboe, broadly in-line with pro forma1 FY18
production volumes of 26.8 MMboe.
FY19 product split (gas / gas liquids / oil) is expected to be broadly unchanged from FY18 levels. Liquids (gas liquids and oil)
are expected to generate more than 60% of Beach revenues in FY19.
Production (MMboe)
30
25
20
15
10
5
0
19.0
10.7
2.5
5.7
26.8
17.1
26.0-28.0
16.6-17.6
Oil
Gas Liquids (condensate/LPG)
Sales Gas/Ethane
3.8
5.9
3.8-4.2
5.6-6.2
FY18 reported
production
FY18 pro forma
production1
FY19 production
guidance
1. Pro forma FY18 defined as a Beach FY18 reported production of 19.0 MMboe plus H1 FY18 Lattice production of 7.9 MMboe. H1 FY18 Lattice
production which was not consolidated within the accounts of Beach. This information is provided for information purposes only and should
not be relied upon.
48 Beach Energy Limited | ABN 20 007 617 969
Funding and capital management
As at 30 June 2018, Beach held cash and cash equivalents of $311 million. On 23 November 2017, Beach entered into
a $1,475 million Senior Secured Debt Facility comprised of a $475 million three year term debt facility (Facility A),
$475 million five year term debt facility (Facility B), $450 million five year revolving debt facility (Facility C), and
$75 million Letter of Credit facility (Facility D).
As at 30 June 2018, $475 million of Facility A was drawn, $475 million of Facility B was drawn and Facility C remained
fully undrawn, with $48.3 million of Facility D being utilised by way of bank guarantees.
Beach anticipates that its current funding to be adequate for capital expenditure anticipated in the 2019 financial year.
Material Business Risks
Beach recognises that the management of risk is a critical component in Beach achieving its purpose of delivering
sustainable growth in shareholder value.
The Company has a framework to identify, understand, manage and report risks. As specified in its Board Charter, the
Board has responsibility for overseeing Beach’s risk management framework and monitoring its material business risks.
Given the nature of Beach’s operations, there are many factors that could impact Beach’s operations and results.
The material business risks that could have an adverse impact on Beach’s financial prospects or performance include
economic risks, health, safety and environmental risks, community and social licence risks and legal risks. These may be
further categorised as strategic risks, operational risks, commercial risks, regulatory risks, reputational risks and financial
risks. A description of the nature of the risk and how such risks are managed is set out below. This list is neither exhaustive
nor in order of importance.
Economic risks
Exposure to oil and gas prices
A decline in the price of oil and gas may have a material adverse effect on Beach’s financial performance. Historically,
international crude oil prices have been very volatile. A sustained period of low or declining crude oil prices could
adversely affect Beach’s operations, financial position and ability to finance developments. Beach has a policy for hedging
oil price and currency risks. Beach uses a structured framework for capital allocation decisions. The process provides
rigorous value and risk assessment against a broad range of business metrics and stringent hurdles to maximise return
on capital. This process is a significant development in Beach’s continuing focus on reducing capital and operating
expenditure and improving business efficiency.
Declines in the price of oil and continuing price volatility may also lead to revisions of the medium and longer term
price assumptions for oil from future production, which, in turn, may lead to a revision of the carrying value of some
of Beach’s assets.
The valuation of oil and gas assets is affected by a number of assumptions, including the quantity of reserves and
resources booked in relation to these oil and gas assets and their expected cash flows. An extended or substantial decline
in oil and/or gas prices or demand, or an expectation of such a decline, may reduce the expected cash flows and/or
quantity of reserves and resources booked in relation to the associated oil and gas assets, which may lead to a reduction
in the valuation of these assets. If the valuation of an oil and gas asset is below its carrying value, a non-cash impairment
adjustment to reduce the historical book value of these assets will be made with a subsequent reduction in the reported
net profit in the same reporting period.
Value Realisation from Commercial Transactions
Commercial transactions undertaken with a growth focus, including the Lattice acquisition, present economic and
operational risks that have the potential to impact anticipated value. Beach has implemented a robust integration process
including a parallel integration risk management process to reduce the likelihood of sub-optimal outcomes in this respect.
Foreign exchange and hedging risk
Beach’s financial report is presented in Australian dollars. Beach converts funds to foreign currencies as its payment
obligations in those jurisdictions where the Australian dollar is not an accepted currency become due. Certain of Beach’s
costs will be incurred in currencies other than Australian dollars, including the US dollar and the New Zealand dollar.
Accordingly, Beach is subject to fluctuations in the rates of currency exchange between these currencies.
The Company uses derivative financial instruments such as foreign exchange contracts, commodity contracts and
interest rate swaps to hedge certain risk exposures, including commodity price fluctuations through the sale of petroleum
productions and other oil-linked contracts. The Company does not have a policy to hedge interest rates, which means it
may be adversely affected by fluctuations in interest rates.
Annual Report 2018 49
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Ability to access funding
Although Beach is currently in a strong liquidity position, the oil and gas business involves significant capital expenditure on
exploration and development, production, processing and transportation. Beach relies on cash flows from operating activities
and bank borrowings and offerings of debt or equity securities to finance capital expenditure.
Beach has a Board approved financial risk management policy covering areas such as liquidity, investment management, debt
management, interest rate risk, foreign exchange risk, commodity risk and counterparty credit risk. The policy sets out the
organisational structure to support this policy. Beach has a treasury function and clear delegations and reporting obligations.
The annual capital and operating budgeting processes approved by the Board ensure appropriate allocation of resources.
Operational risks
Joint Venture Operations
Beach participates in a number of joint ventures for its business activities. This is a common form of business arrangement
designed to share risk and other costs. Under certain joint venture operating agreements, Beach may not control the approval
of work programs and budgets and a joint venture partner may vote to participate in certain activities without the approval
of Beach. As a result, Beach may experience a dilution of its interest or may not gain the benefit of the activity, except at a
significant cost penalty later in time.
Failure to reach agreement on exploration, development and production activities may have a material impact on Beach’s
business. Failure of Beach’s joint venture partners to meet financial and other obligations may have an adverse impact on
Beach’s business.
Beach works closely with its joint venture partners to minimise joint venture misalignment.
Material change to reserves and resources
Underground oil and gas reserves and resources estimates are expressions of judgement based on knowledge, experience
and industry practice. Estimates which are valid at a certain point in time may alter significantly or become uncertain when
new oil and gas reservoir information becomes available through additional drilling, or reservoir engineering over the life of
the field. As reserves and resources estimates change, development and production plans may be altered in a way that may
adversely affect Beach’s operations and financial results.
Beach prepares its petroleum reserves and contingent resources estimates in accordance with the Petroleum Resources
Management System (PRMS) published by the Society of Petroleum Engineers and are subject to periodic external
review or audit.
Exploration and development
Success in oil and gas production is key and in the normal course of business Beach depends on the following factors:
successful exploration, establishment of commercial oil and gas reserves, finding commercial solutions for exploitation of
reserves, ability to design and construct efficient production, gathering and processing facilities, efficient transportation and
marketing of hydrocarbons and sound management of operations. Oil and gas exploration is a speculative endeavour and the
nature of the business carries a degree of risk associated with failure to find hydrocarbons in commercial quantities or at all.
Beach utilises well-established prospect evaluation and ranking methodology to manage exploration and development risks.
Production risks
Any oil or gas project, including off-shore activity, may be exposed to production decrease or stoppage, which may be the
result of facility shut-downs, mechanical or technical failure, climactic events and other unforeseeable events. A significant
failure to maintain production could result in Beach lowering production forecasts, loss of revenue and additional operational
costs to bring production back online.
There may be occasions where loss of production may incur significant capital expenditure, resulting in the requirement for
Beach to seek additional funding, through equity or debt. Beach’s approach to facility design, process safety and integrity
management is critical to mitigating production risks.
Cyber Risk
The integrity, availability and reliability of data within Beach’s information and operational technology systems may be subject
to intentional or unintentional disruption (for example, cyber security attack). Beach continues to invest in leading systems to
prevent such attacks and to optimise response should one occur.
50 Beach Energy Limited | ABN 20 007 617 969
Social licence to operate risks
Regulatory risk
Changes in government policy (such as in relation to taxation, environmental protection and the methodologies permitted
to be used in oil and gas exploration and production activity such as produced water disposal) or statutory changes may
affect Beach’s business operations and its financial position. A change in government regime may significantly result in
changes to fiscal, monetary, property rights and other issues which may result in a material adverse impact on Beach’s
business and its operations.
Companies in the oil and gas industry may also be required to pay direct and indirect taxes, royalties and other imposts in
addition to normal company taxes. Beach currently has operations or interests in Australia and New Zealand. Accordingly
its profitability may be affected by changes in government taxation and royalty policies or in the interpretation or
application of such policies in each of these jurisdictions.
Beach monitors changes in relevant regulations and engages with regulators and governments to ensure policy and law
changes are appropriately influenced and understood.
Permitting risk
All petroleum licences held by Beach are subject to the granting and approval of relevant government bodies and
ongoing compliance with licence terms and conditions.
Tenure management processes and standard operating procedures are utilised to minimise the risk of losing tenure.
Land access and Native Title
Beach is required to obtain the consent of owners and occupiers of land within its licence areas. Compensation may
be required to be paid to the owners and occupiers of land in order to carry out exploration activities.
Beach operates in a number of areas within Australia that are or may become subject to claims or applications for
native title determinations or other third party access. Although Beach has experience in dealing with native title claims
in Australia in relation to some of its existing Cooper Basin licences, native title claims have the potential to introduce
delays in the granting of petroleum and other licences and, consequently, may have an effect on the timing and cost of
exploration, development and production.
Native or indigenous title and land rights may also apply or be implemented in other jurisdictions in which Beach
operates outside of Australia.
Beach’s standard operating procedures and stakeholder engagement processes are used to manage land access and
native title risks.
Health, safety and environmental risks
The business of exploration, development, production and transportation of hydrocarbons involves a variety of risks which
may impact the health and safety of personnel, the community and the environment.
Oil and gas production and transportation can be impacted by natural disasters, operational error or other occurrences
which can result in hydrocarbon leaks or spills, equipment failure and loss of well control. Potential failure to manage these
risks could result in injury or loss of life, damage or destruction of wells, production facilities, pipelines and other property,
damage to the environment, legal liability and damage to Beach’s reputation.
Losses and liabilities arising from such events could significantly reduce revenues or increase costs and have a material
adverse effect on the operations and/or financial conditions of Beach.
Beach employs a combination of insurance policies, standard operating procedures, contractor pre-qualification, facility
design and integrity management systems to mitigate these risks.
Climate change
Beach is likely to be subject to increasing regulations and costs associated with climate change and management
of carbon emissions. Strategic, regulatory and operational risks and opportunities associated with climate change are
incorporated into Company policy, strategy and risk management processes and practices. The Company actively
monitors current and potential areas of climate change risk and takes actions to prevent and/or mitigate any impacts on
its objectives and activities. Reduction of waste and emissions is an integral part of delivery of cost efficiencies and forms
part of the Company’s routine operations.
Annual Report 2018 51
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Forward Looking Statements
This report contains forward-looking statements, including statements of current intention, opinion and predictions regarding
the Company’s present and future operations, possible future events and future financial prospects. While these statements
reflect expectations at the date of this report, they are, by their nature, not certain and are susceptible to change. Beach
makes no representation, assurance or guarantee as to the accuracy or likelihood of fulfilling of such forward looking
statements (whether expressed or implied), and except as required by applicable law or the ASX Listing Rules, disclaims any
obligation or undertaking to publicly update such forward-looking statements.
Material Prejudice
As permitted by sections 299(3) and 299A(3) of the Corporations Act 2001, Beach has omitted some information from
the above Operating and Financial Review in relation to the Company’s business strategy, future prospects and likely
developments in operations and the expected results of those operations in future financial years on the basis that such
information, if disclosed, would be likely to result in unreasonable prejudice (for example, because the information is
premature, commercially sensitive, confidential or could give a third party a commercial advantage). The omitted information
typically relates to internal budgets, forecasts and estimates, details of the business strategy, and contractual pricing.
Environmental regulations and performance statement
Beach participates in projects and production activities that are subject to the relevant exploration and development licences
prescribed by government. These licences specify the environmental regulations applicable to the exploration, construction
and operations of petroleum activities as appropriate. For licences operated by other companies, this is achieved by
monitoring the performance of these companies against these regulations.
There have been no known significant breaches of the environmental obligations of Beach’s operated contracts or licences
during the financial year.
Beach reports under the National Greenhouse and Energy Reporting Act for its Australian Operations and the Climate Change
Response Act 2002 for its New Zealand operations.
Dividends paid or recommended
Since the end of the financial year the directors have resolved to pay a fully franked dividend of 1.0 cents per share on
28 September 2018. The record date for entitlement to this dividend is 31 August 2018. The financial impact of this dividend,
amounting to $22.8 million has not been recognised in the Financial Statements for the year ended 30 June 2018 and will be
recognised in subsequent Financial Statements.
The details in relation to dividends paid during the reporting period are set out below:
Dividend
Record Date
Date of payment
Cents per share
Total Dividends
FY17 Final
FY18 Interim
28 August 2017
9 March 2018
29 September 2017
29 March 2018
1.0
1.0
$18.7 million
$22.8 million
For Australian income tax purposes, all dividends were fully franked and were not sourced from foreign income.
52 Beach Energy Limited | ABN 20 007 617 969
Share options and rights
Beach does not have any options on issue at the end of financial year and has not issued any during FY18.
Share rights holders do not have any right to participate in any issue of shares or other interests in the Company or any
other entity. There have been no unissued shares or interests under option of any controlled entity within the Group
during or since the reporting date. For details of performance rights issued to executives as remuneration, refer to the
Remuneration Report. During the financial year, the following movement in share rights to acquire fully paid shares
occurred:
Executive Performance Rights
On 1 December 2017, Beach issued 1,122,117 Short Term Incentive (STI) unlisted performance rights under the Executive
Incentive Plan (EIP). These performance rights, are exercisable for nil consideration and are not exercisable before
1 July 2018 and 1 July 2019.
On 1 December 2017, Beach also issued 2,029,050 Long Term Incentive (LTI) unlisted performance rights under the
Executive Incentive Plan (EIP). These performance rights, which expire on 30 November 2022, are exercisable for nil
consideration and are not exercisable before 1 December 2020. A further 963,475 LTI unlisted performance rights were
issued on 9 April 2018 under the EIP, which expire on 30 November 2022, are exercisable for nil consideration and are
not exercisable before 1 December 2020.
Rights
2014 LTI unlisted rights
Issue 1 December 2014
2015 LTI unlisted rights
Issue 1 December 2015
2015 LTI unlisted rights
Issue 19 May 2016
CEO STI unlisted rights
Issue 19 May 2016
2016 LTI unlisted rights
Issue 1 December 2016
2016 LTI unlisted rights
Issue 21 February 2017
2016 STI unlisted rights
Issue 1 December 2017
2017 LTI unlisted rights
Issue 1 December 2017
2017 LTI unlisted rights
Issue 9 April 2018
Total
Balance at
beginning of
financial year
Issued during
the financial year
Exercised during
the financial year
Expired during the
financial year and
not exercised
Balance at end
of financial year
887,272
1,739,185
815,401
414,547
2,485,295
479,096
–
–
–
6,820,796
–
–
–
–
–
–
1,122,117
2,029,050
963,475
4,114,642
(799,344)
(87,928)
–
–
–
(414,547)
–
–
–
–
–
(1,335,959)
403,226
–
–
815,401
–
(881,289)
1,604,006
(203,253)
275,843
(201,596)
920,521
(387,621)
1,641,429
–
963,475
(1,213,891)
(3,097,646)
6,623,901
Annual Report 2018 53
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Information on Directors
The names of the directors of Beach who held office during
the financial year and at the date of this report are:
Philip James Bainbridge
Independent non-executive director – BSc (Hons) Mechanical
Engineering, MAICD
Glenn Stuart Davis
Independent non-executive Chairman – LLB, BEc, FAICD
Experience and expertise
Mr Davis has practiced as a solicitor in corporate and risk
throughout Australia for over 30 years initially in a national
firm and then a firm he founded. He brings to the Board
his expertise in the execution of large transactions and his
expertise and experience in corporate activity regulated by
the Corporations Act and ASX Limited.
Current and former listed company directorships
in the last 3 years
Mr Davis is a director of ASX listed company Monax Mining
Limited (since 2004) and a former director of Marmota
Energy Limited (from 2007 to June 2015).
Responsibilities
His special responsibilities include membership of the
Remuneration and Nomination Committee.
Date of appointment
Mr Davis joined Beach on 6 July 2007 as a non-executive
director. He was appointed non-executive Deputy Chairman
in June 2009 and Chairman in November 2012. He was last
re-elected to the Board on 10 November 2016.
Experience and expertise
Mr Bainbridge has extensive industry experience having
worked for the BP Group for 23 years in a range of
petroleum engineering, development, commercial and senior
management roles in the UK, Australia and USA. From 2006,
he has worked at Oil Search, initially as Chief Operating
Officer, then Executive General Manager LNG, responsible
for all aspects of Oil Search’s interests in the $19 billion PNG
LNG project, then EGM Growth responsible for gas growth
and exploration.
Current and former listed company directorships
in the last 3 years
He is currently a non-executive chairman of the PNG
Sustainable Development Program and a non-executive
Chairman of Sino Gas and Energy Holding. He was formerly
a non-executive director of Drillsearch Energy Limited from
2013 to 2016.
Responsibilities
His special responsibilities include chairmanship of the Risk,
Corporate Governance and Sustainability Committee.
Date of appointment
Mr Bainbridge was appointed to the Board on 1 March 2016,
last having been elected to the Board on 10 November 2016.
Colin David Beckett
Independent non-executive Deputy Chairman –
FIEA, MICE, GAICD
James David McKerlie
Independent non-executive director – BEc, Dip Fin Mgt,
FCA FAICD
Experience and expertise
Mr McKerlie brings to the Board over 20 years’ experience
as director and chairman of public companies. He is
an experienced international executive and Chartered
Accountant with appointments as a partner at KPMG and
Partner in Charge at Deloitte.
Current and former listed company directorships
in the last 3 years
He is the current chairman of ELMO Software Limited
(since June 2017) and is the former chairman of Drillsearch
Energy Limited (from 2008 to 2016), and a director of
Great Artesian Oil and Gas, former chairman of Manalto
Limited (from 2016 to 2017), Lithium Consolidated Minerals
Exploration Limited (2017), onthehouse Limited (2010 to
2012) and Two Way TV (1999 to 2002).
Responsibilities
His special responsibilities include membership of the
Audit Committee.
Date of appointment
Mr McKerlie was appointed to the Board on 1 March 2016
following the merger with Drillsearch and was last elected
to the Board on 10 November 2016.
Experience and expertise
As an engineer with over 40 years’ experience in engineering
design, project management, commercial and gas
marketing, Mr Beckett offers a diverse and complementary
set of skills in a range of technical disciplines. Mr Beckett
previously held senior executive positions at Chevron
Australia Pty Ltd, most recently as the General Manager
responsible for the development of the Gorgon LNG and
domestic gas project, being developed on Barrow Island
offshore Western Australia. Mr Beckett read engineering at
Cambridge University and has a Master of Arts (1975). He is
currently the Chancellor of Curtin University and Chairman
of Western Power. He is a past Chairman of Perth Airport
Pty Ltd and also a past Chairman and board member of the
Australian Petroleum Producers and Explorers Association
(APPEA). In addition Mr Beckett is a past member of the
West Australian Scitech Board and the Resources Sector
Suppliers Advisory Forum and a Fellow of the Australian
Institute of Engineers.
Current and former listed company directorships
in the last 3 years
Nil.
Responsibilities
His special responsibilities include chairmanship of
the Remuneration and Nomination Committee and
membership of the Risk, Corporate Governance and
Sustainability Committee.
Date of appointment
Mr Beckett was appointed to the Board on 2 April 2015, last
having been re-elected to the Board on 23 November 2017.
54 Beach Energy Limited | ABN 20 007 617 969
Peter Stanley Moore
Independent non-executive director – PhD, BSc (Hons),
MBA, GAICD
Richard Joseph Richards
Non-executive director – BComs/Law (Hons), LLM,
MAppFin, CA, Admitted Solicitor
Experience and expertise
Dr Moore has over 35 years of oil and gas industry
experience. His career commenced at the Geological
Survey of Western Australia, with subsequent
appointments at Delhi Petroleum Pty Ltd, Esso Australia,
ExxonMobil and Woodside. Dr Moore joined Woodside as
Geological Manager in 1998 and progressed through the
roles of Head of Evaluation, Exploration Manager Gulf of
Mexico, Manager Geoscience Technology Organisation
and Vice President Exploration Australia. From 2009 to
2013, Dr Moore led Woodside’s global exploration efforts
as Executive Vice President Exploration. In this capacity,
he was a member of Woodside’s Executive Committee
and Opportunities Management Committee, a leader of its
Crisis Management Team, Head of the Geoscience function
and a director of ten subsidiary companies. From 2014 to
2018, Dr Moore was a Professor and Executive Director
of Strategic Engagement at Curtin University’s Business
School. He has his own consulting company, Norris
Strategic Investments Pty Ltd.
Current and former listed company directorships
in the last 3 years
Dr Moore is currently a non-executive director of Central
Petroleum Ltd (since 2014) and Carnarvon Petroleum Ltd
(since 2015).
Responsibilities
His special responsibilities include membership of the Risk,
Corporate Governance and Sustainability Committee and
the Remuneration and Nomination Committee.
Date of appointment
Dr Moore was appointed by the Board on 1 July 2017 and
then elected to the Board on 23 November 2017.
Ryan Kerry Stokes
Non-executive director – BComm, FAIM
Experience and expertise
Mr Stokes is the Managing Director and Chief Executive
Officer of Seven Group Holdings Limited (SGH). SGH is a
listed diverse investment company involved in Industrial
Services, Media, and Energy. SGH interests include 25.6% of
Beach Energy, WesTrac, Coates Hire and 41% of Seven West
Media Limited. Mr Stokes is Chairman of the National Gallery
of Australia. He is also a member of the Prime Ministerial
Advisory Council on Veterans’ Mental Health, a Committee
member of the innovationXchange (within the Department of
Foreign Affairs and Trade), and a member of the International
Olympic Committee Education Commission. His previous roles
include Chairman of the National Library of Australia.
Current and former listed company directorships
in the last 3 years
Mr Stokes is an executive director of SGH and a
non-executive director of Seven West Media.
Responsibilities
His special responsibilities include membership of the
Remuneration and Nomination Committee.
Date of appointment
Mr Stokes was appointed to the Board on 20 July 2016
and then elected to the Board on 10 November 2016.
Experience and expertise
Mr Richards is currently Chief Financial Officer of Seven
Group Holdings Limited (SGH) (since October 2013). He is
responsible for Finance across the diversified conglomerate
(equipment manufacture, sales and service, equipment hire,
investments, property, media and oil and gas). Mr Richards
is a member of the Board of Directors of WesTrac, SGH
Energy, is a Director and Chair of the Audit and Risk
Committee of Coates Hire Pty Limited, a Director and
Chair of the Audit and Risk Committee of KU Children
Services (NFP) and a member of the Marcia Burgess
Foundation Committee (DGR). He had held senior finance
roles with Downer EDI, the Lowy Family Group and Qantas.
Mr Richards is both a Chartered Accountant and admitted
solicitor with over 30 years of experience in business and
complex financial structures, corporate governance, risk
management and audit.
Current and former listed company directorships
in the last 3 years
Nil.
Responsibilities
His special responsibilities include membership of the
Audit Committee, which he temporarily chaired during
a casual vacancy.
Date of appointment
Mr Richards was appointed to the Board on 4 February
2017 and then elected to the Board on 23 November 2017.
Joycelyn Cheryl Morton
Independent non-executive director – BEc, FCA, FCPA,
FIPA, FCIS, FAICD
Experience and expertise
Ms Morton has more than 38 years’ experience in finance and
taxation having begun her career with Coopers & Lybrand
(now PwC), followed by senior management roles with
Woolworths Limited and global leadership roles in Australia
and internationally within the Shell Group of companies.
Ms Morton was National President of both CPA Australia
and Professions Australia, has served on many committees
and councils in the private, government and not-for-profit
sectors and held international advisory positions. She holds
a Bachelor of Economics degree from the University of
Sydney. She is also a non-executive director of ASC Pty Ltd
and Snowy Hydro Limited.
Current and former listed company directorships
in the last 3 years
Her other current ASX listed board positions are Argo
Investments Limited and Argo Global Listed Infrastructure
Limited. She has valuable board experience across a range
of industries, including previous roles as a non-executive
director and Chair of both Thorn Group Limited and
Noni B Limited and a non-executive director of Crane Group
Limited, Count Financial Limited and InvoCare Limited.
Responsibilities
Her special responsibilities include Chairmanship of the
Audit Committee.
Annual Report 2018 55
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Date of appointment
Ms Morton was appointed a non-executive director of
Beach Energy Limited on 21 February 2018.
The names of the directors of Beach who held office during
the financial year and are no longer on the Board are:
Fiona Rosalyn Vivienne Bennett
Independent non-executive director –
BA(Hons), FCA, FAICD, FAIM
Experience and expertise
Ms Bennett is a Chartered Accountant with over 30 years’
experience in business and financial management, corporate
governance, risk management and audit. She has previously
held senior executive positions at BHP Billiton Limited and
Coles Group Limited, and has been the Chief Financial Officer
at several organisations within the health sector. Ms Bennett
is a graduate of The Executive Program at the University of
Virginia’s Darden Graduate School and the AICD Company
Directors’ course.
Current and former listed company directorships
in the last 3 years
She is currently a director of Hills Holdings Limited (since
2010) and Select Harvests Limited (since 2017) and a former
director of Boom Logistics Limited (from 2010 to 2015).
Responsibilities
Her special responsibilities included chairmanship of the
Audit Committee and membership of the Risk, Corporate
Governance and Sustainability Committee.
Date of appointment/resignation
Ms Bennett was elected to the Board on 23 November 2012,
last having been re-elected to the Board on
25 November 2015. She retired on 23 November 2017.
Directors’ meetings
The number of Directors’ meetings and meetings of Committees of Directors held during the financial year and the
number of meetings attended by each of the directors is set out below:
NUMBER OF
DIRECTORS’ MEETINGS
AUDIT COMMITTEE
MEETINGS
REMUNERATION
AND NOMINATION
COMMITTEE MEETINGS
RISK, CORPORATE
GOVERNANCE AND
SUSTAINABILITY
COMMITTEE MEETINGS
Name
Held 1
Attended
Held
Attended
Held
Attended
Held
Attended
G S Davis
P J Bainbridge
C D Beckett
F R V Bennett
J D McKerlie
P S Moore
J C Morton
R J Richards
R K Stokes
14
14
14
8
14
14
4
14
14
14
14
13
7
14
14
4
14
13
3
–
–
3
7
–
1
7
–
3
–
–
2
7
–
1
7
–
8
–
8
–
–
–
–
–
8
8
–
8
–
–
–
–
–
8
–
4
4
2
–
2
–
–
–
–
4
4
1
–
2
–
–
–
1. Number of Meetings held during the time that the director was appointed to the Board or a committee.
Board Committees
Chairmanship and current membership of each of the board committees at the date of this report are as follows:
Committee
Audit
Risk, Corporate Governance & Sustainability
Remuneration and Nomination
Chairman
J C Morton
P J Bainbridge
C D Beckett
Members
J D McKerlie, R J Richards
C D Beckett, P S Moore
G S Davis, R K Stokes, P S Moore
56 Beach Energy Limited | ABN 20 007 617 969
Rounding off of amounts
Beach is an entity to which ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191
issued by the Australian Securities and Investments
Commission applies relating to the rounding off of
amounts. Accordingly, amounts in the directors’ report and
the financial statements have been rounded to the nearest
hundred thousand dollars, unless shown otherwise.
Proceedings on behalf of Beach
No person has applied to the Court under Section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of Beach, or to intervene in any
proceedings to which Beach is a party, for the purpose of
taking responsibility on behalf of Beach for all or part of
those proceedings.
No proceedings have been brought or intervened in on
behalf of Beach with leave of the Court under Section 237
of the Corporations Act 2001.
Audit independence declaration
Section 307C of the Corporations Act 2001 requires our
auditors, Ernst & Young, to provide the directors of Beach
with an Independence Declaration in relation to the audit
of the full year financial statements. This Independence
Declaration is made on the following page and forms part
of this Directors’ Report.
This directors’ report is signed in accordance with a
resolution of directors made pursuant to section 298(2)
of the Corporations Act 2001.
On behalf of the directors
G S Davis
Chairman
Adelaide, 20 August 2018
Indemnity of Directors and Officers
Beach has arranged directors’ and officers’ liability
insurance policies that cover all the directors and officers
of Beach and its controlled entities. The terms of the
policies prohibit disclosure of details of the amount of the
insurance cover, the nature thereof and the premium paid.
Company Secretary
Peter Kupniewski
Company Secretary – LL.B/LP
Mr Kupniewski joined Beach in June 2018 as Senior
Legal Manager & Company Secretary. He most recently
worked as an in house lawyer with Santos Ltd working
on asset acquisitions and divestments, gas marketing and
transport, native title and cultural heritage, contracting
and procurement and commercial disputes. Prior to
Santos, Mr Kupniewski spent 13 years in private legal
practice where he gained extensive experience working
on takeovers and schemes, capital raisings, commercial
disputes and meeting the daily head office needs of a
range of ASX listed entities.
Non-audit services
Beach may decide to employ the external auditor on
assignments additional to their statutory audit duties
where the auditor’s expertise and experience with Beach
are important.
The Board has considered the position and is satisfied
that the provision of the non-audit services is compatible
with the general standard of independence for auditors
imposed by the Corporations Act 2001. The directors are
satisfied that the provision of non-audit services by the
auditor as set out below, did not compromise the audit
independence requirement of the Corporations Act 2001
for the following reasons:
§ All non-audit services have been reviewed by the Audit
Committee to ensure they do not impact the impartiality
and objectivity of the auditor.
§ None of the services undermine the general principle
relating to auditor independence as set out in APES 110
Code – Code of Ethics for Professional Accountants,
including reviewing or auditing the auditor’s own work,
acting in a management or a decision making capacity
for Beach, acting as advocate for Beach or jointly
sharing economic risk and reward.
Details of the amounts paid or payable to the external
auditors, Ernst & Young, for audit and non-audit services
provided during the year are set out at Note 28 to the
financial statements.
Annual Report 2018 57
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION AUDITOR’S INDEPENDENCE
DECLARATION
Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
Auditor’s Independence Declaration to the Directors of Beach Energy Limited
As lead auditor for the audit of Beach Energy Limited for the financial year ended 30 June 2018, I
declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Beach Energy Limited and the entities it controlled during the financial
year.
Ernst & Young
Anthony Jones
Partner
Adelaide
20 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
58 Beach Energy Limited | ABN 20 007 617 969
2018 REMUNERATION
IN BRIEF (UNAUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
FY18 remuneration outcomes at a glance
Fixed Remuneration
No increase
for senior
executives
Short Term Incentive (STI) STI awarded
LTI partially
Long Term Incentive (LTI)
vested
Non-executive directors
Director fee
increases
2017 AGM
Remuneration Report
98% ‘Yes vote’
Total fixed remuneration (TFR) for senior executives employed in FY17 and
FY18 did not increase from the previous year.
The board awarded an STI to senior executives.
The 2014 LTI performance rights partially vested following achievement of the
performance condition.
The board engaged an external remuneration consultant to provide benchmark
board and committee fee data. Following a review of this data, the Board
increased annual board fees (but not committee fees) for the coming year from
$250,000 for the Chairman to $275,000, $121,000 for the Deputy Chairman
from $100,000 and for members, $110,000 from $100,000. Board fees had not
previously increased since 2012.
Beach received more than 98% of ‘yes’ votes on a poll to adopt its Remuneration
Report for the 2017 financial year. No specific feedback on Beach’s remuneration
practices was received at the 2017 annual general meeting.
Remuneration to executive key management personnel in FY18
A summary of the audited cost to the Company of executive key management personnel (KMP) remuneration is provided
in Table 10.
Disclosures required in the remuneration report by the Corporations Act, particularly the inclusion of accounting values
for LTI performance rights awarded but not vested, can vary significantly from the remuneration actually paid to senior
executives. This is because the Accounting Standards require a value to be placed on a right at the time it is granted to
a senior executive and then reported as remuneration even if ultimately the senior executive does not receive any actual
value, for example because performance conditions are not met and the rights do not vest.
The following table is a summary of remuneration actually paid to executive KMP in FY18. It is not audited.
Table 1: Remuneration to executive key management personnel (unaudited)
Name
Current KMP
M V Kay
Chief Executive Officer
M Engelbrecht
Chief Financial Officer
D Summers 2
Chief Operating Officer
G J Barker 3
Group Executive Development
L Marshall 4
Group Executive Corporate Strategy & Commercial
J L Schrull
Group Executive Exploration & Appraisal
Former KMP
K Hollingsworth 5
C L Oster 6
R A Rayner 7
M R Squire 8
M R Dodd 9
Total
TFR
Salary
$
Super
$
STI
cash bonus
$
Other 1
$
Termination
$
Total Cash
$
878,000
25,000
364,662
500,000
25,000
172,129
275,655
10,142
41,640
181,520
17,244
28,172
244,638
12,500
35,698
454,951
20,049
133,603
167,133
223,378
228,863
217,455
248,347
12,940
12,500
12,402
13,406
12,500
–
–
–
41,055
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
102,328
–
653,873
–
1,267,662
697,129
327,437
226,936
292,836
608,603
282,401
235,878
895,138
271,916
661,459
3,619,940
173,683
816,959
1,019
1,155,794 5,767,395
–
1,019
399,593
1. Other remuneration includes allowances paid under the terms and conditions of employment such as vehicle allowances.
2. Appointed 31 January 2018.
3. Appointed 19 February 2018.
4. Appointed 15 January 2018.
5. Ceased on 31 December 2017.
6. Ceased to be KMP on 31 December 2017. A termination payment of $644,184 was made to Ms Oster during FY18 but after she ceased to be a KMP.
7. Ceased on 15 December 2017.
8. Ceased to be KMP close of business on 14 January 2018.
9. Ceased on 31 December 2017.
Annual Report 2018 59
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT
(AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
This report has been prepared in accordance with section 300A of the Corporations Act 2001 (Cth) (Corporations Act) for
the consolidated entity for the financial year ended 30 June 2018. It has been audited as required by section 308(3C) of the
Corporations Act and forms part of the Directors’ Report.
Key management personnel
The Company’s KMP are listed in Table 2. They are the Company’s non-executive directors (NED) and executive KMP who
have authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly.
Table 2: Key management personnel during FY18
Name
Executive KMP
M V Kay
M Engelbrecht
D Summers
G J Barker
L Marshall
J L Schrull
Former KMP
M R Dodd
K Hollingsworth
C L Oster
R A Rayner
M R Squire
Position
Period as KMP during the year
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
All of FY18
All of FY18
Appointed 31 January 2018
Group Executive Development
Appointed 19 February 2018
Group Executive Corporate Strategy and
Commercial
Appointed 15 January 2018
Group Executive Exploration and
Appraisal
All of FY18
Chief Operating Officer
Ceased to be a KMP on 31 December 2017
Group Executive Human Resources
Ceased to be a KMP on 31 December 2017
General Counsel and Company Secretary
Ceased to be a KMP on 31 December 2017
Group Executive Commercial
Ceased to be a KMP on 15 December 2017
Group Executive Corporate Development
and Strategy
Ceased to be a KMP close of business on
14 January 2018
Non-executive Directors
G S Davis
P J Bainbridge
C D Beckett
J D McKerlie
P S Moore
J C Morton
R J Richards
R K Stokes
Former Non-executive Directors
Independent Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive director
Non-executive Director
Non-executive Director
Non-executive Director
All of FY18
All of FY18
All of FY18
All of FY18
All of FY18
Appointed 21 February 2018
All of FY18
All of FY18
F R V Bennett
Non-executive Director
Ceased to be a Director on 23 November 2017
Beach’s remuneration policy framework
Beach’s purpose is to deliver sustainable growth in shareholder value.
Beach’s remuneration framework seeks to focus executives on delivering that purpose:
§ Fixed remuneration aligns to market practice and prevailing economic conditions. It seeks to attract, motivate and retain
executives focused on delivering Beach’s purpose.
§ ‘At risk’ performance based incentives link to shorter and longer term Company goals. The goals contribute to the
achievement of Beach’s purpose.
§ Longer term ‘at risk’ incentives align with shareholder objectives and interests. Beach benchmarks shareholder returns
against peers considered to be alternative investments to Beach. Beach offers share based rather than all cash rewards
to executives.
§ Beach may recover remuneration benefits paid if there has been fraud or dishonesty.
§ The Corporations Act and Beach’s Share Trading Policy prohibit hedging. Hedging is where a person enters a transaction
to reduce the risk of an ‘at risk’ incentive. Beach has a process to track compliance with its no hedging policy. Beach’s
Share Trading Policy is available at Beach’s website: www.beachenergy.com.au.
How Beach makes decisions about remuneration
The Board decides Beach’s KMP remuneration. It decides that remuneration based on recommendations by its Remuneration
and Nomination Committee. The Committee’s members are all non-executive directors. Its charter is available at Beach’s
website: www.beachenergy.com.au. Beach’s CEO may attend Committee meetings by invitation in an advisory capacity. Other
executives may also attend by invitation. The Committee excludes executives from any discussion about their own remuneration.
60 Beach Energy Limited | ABN 20 007 617 969
External advisers and remuneration advice
During the year Beach engaged Guerdon Associates to provide services to the Company. It provided data to help the
Board make decisions about Board and Committee fees. It did not make a remuneration recommendation for the purpose
of the Corporations Act 2001.
Beach follows a protocol to engage any adviser to make a remuneration recommendation. The protocol ensures the
recommendation is free from undue influence by management. The Board or Committee chair engages the adviser.
The Board or Committee chair deals with the adviser on all material matters. Management involvement is only to the
extent necessary to coordinate the work.
The Board and Committee seek recommendations from the Chief Executive Officer about executive remuneration.
The Chief Executive Officer does not make any recommendation about his own remuneration.
The Board and Committee have regard to industry benchmarking information.
The Board and Committee consulted with governance specialists and other stakeholder groups throughout the year.
The matters discussed included KMP remuneration. There were few consistent opinions between these groups. Even
so the Board and Committee had regard to their views.
How Beach links performance to incentives
Beach’s remuneration policy includes short and long term incentive plans. The plans seek to align management
performance with shareholder interests.
The LTI links to an increase in total shareholder return over an extended period.
The STI has equal proportions of cash and performance rights. Performance rights may convert to Beach shares.
The following table shows some key shareholder wealth indicators.
KPI and STI awards for FY17 and FY18 are detailed in Table 10.
Table 3: Shareholder wealth indicators FY14 – FY18
Total revenue
Net profit / (loss) after tax
Underlying net profit after tax
Share price at year-end
Dividends declared
Reserves
Production
FY14
FY15
FY16
FY17
FY18
$1,057.7m
$101.8m
$259.2m
$735.5m
($514.1m)
$90.7m
168.0 cents
105.0 cents
4.00 cents
86 MMboe
9.6 MMboe
1.50 cents
74 MMboe
9.1 MMboe
$564.6m
($588.8m)
$35.7m
61.0 cents
0.50 cents
70 MMboe
$665.7m
$387.5m
$161.7m
57.5 cents
2.00 cents
75 MMboe
$1,267.4m
$198.8m
$301.5m
175.5 cents
2.00 cents
313 MMboe
9.7 MMboe
10.6 MMboe
19.0 MMboe
Senior executive remuneration structure
This section details the remuneration structure for senior executives.
Remuneration mix
Remuneration for senior executives is a mix of a fixed cash salary component and an ‘at risk’ component. The ‘at risk’
component means that specific targets or conditions must be met before a senior executive becomes entitled to it.
What is the balance between fixed and ‘at risk’ remuneration?
The remuneration structure and packages offered to senior executives for the period were:
§ Fixed remuneration.
§ ‘At risk’ remuneration comprising:
Short term incentive (STI) – an annual cash and equity based incentive, which may be offered at the discretion of the
Board, linked to Company and individual performance over a year.
Long term incentive (LTI) – equity grants, which may be granted annually at the discretion of the Board, linked to
performance conditions measured over three years.
The balance between fixed and ‘at risk’ remuneration depends on the senior executive’s role. The Chief Executive Officer
has the highest level of ‘at risk’ remuneration reflecting the greater level of responsibility of this role.
Annual Report 2018 61
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
Table 4 sets out the relative proportions of the three elements of the executives KMP’s total remuneration packages for the
2017 and 2018 financial years.
Table 4: Remuneration mix 1
Position
Chief Executive Officer 2
2018
2017
Other Executive KMP
2018
2017
Fixed
Remuneration
%
34
34
51
51
PERFORMANCE BASED REMUNERATION
STI
%
33
33
23
23
LTI
%
33
33
26
26
Total ‘at risk’
%
66
66
49
49
1. The remuneration mix assumes maximum at risk awards. Percentages shown later in this report reflect the actual incentives paid as a percentage of total
fixed remuneration, movements in leave balances and other benefits and share based payments calculated using the relevant accounting standards.
2. Mr Kay commenced as Chief Executive Officer on 2 May 2016 and was offered long term incentive ‘at risk’ remuneration for FY16. The figures here
do not include the CEO’s commencement grants.
Fixed remuneration
What is fixed remuneration?
How is fixed remuneration
reviewed?
Senior executives are entitled to a fixed cash remuneration amount inclusive of the
guaranteed superannuation contribution. The amount is not based upon performance. Senior
executives may decide to salary sacrifice part of their fixed remuneration for additional
superannuation contributions and other benefits.
Fixed remuneration is determined by the Board based on independent external review or
advice that takes account of the role and responsibility of each senior executive. It is reviewed
annually against industry benchmarking information including the National Awards Group
Incorporated remuneration survey.
Fixed remuneration for the year
Total fixed remuneration (TFR) of KMP employed in FY17 and FY18 did not increase from the previous year.
Remuneration details for individuals are provided in Table 1 and Table 10. Table 10 reports on the remuneration for KMP as
required under the Corporations Act. Table 1 shows the actually realised cash remuneration that KMP received.
Short Term Incentive (STI)
What is the STI?
How does the STI link to
Beach’s objectives?
The STI is part of ‘at risk’ remuneration offered to senior executives. It measures individual
and Company performance over a 12 month period. The period coincides with Beach’s
financial year. It provides equal parts of cash and equity that may vest subject to extra
retention conditions. It is offered to senior executives at the discretion of the Board.
The STI is an at risk opportunity for senior executives. It rewards senior executives for
meeting or exceeding key performance indicators. The key performance indicators link
to Beach’s key purpose. The STI aims to motivate senior executives to meet Company
expectations for success. Beach can only achieve its purpose if it attracts and retains
high performing senior executives. An award made under the STI has a retention
component. Half is paid in cash and half is issued as performance rights with service
conditions attached.
62 Beach Energy Limited | ABN 20 007 617 969
What are the performance
conditions or KPIs?
Beach’s key performance indicators (KPIs) are set by the Board for each 12 month period
beginning at the start of a financial year. They reflect Beach’s financial and operational
goals that are essential to it achieving its purpose. Senior executives also have individual
KPIs to reflect their particular responsibilities.
For the reporting period, the performance measures comprised:
§ Beach KPIs (60% weighting)
– Production (15%)
– Safety (10%)
– Environment (5%)
– Reserves replacement (15%)
– Statutory NPAT (15%)
Individual KPIs (40% weighting).
§
Refer to Table 6 for more information.
Individual KPIs link to Beach’s strategy and strategic plan. Individual KPIs relate to areas
where senior executives are able to influence or control outcomes. KPIs may include:
delivery of cost savings; development of project specific plans to align with Beach’s
strategic pillars; specific initiatives for developing employee capability; funding capacity;
improvements in systems to achieve efficiencies; specific commercial or corporate
milestones; or specific safety and environmental targets.
Are there different
performance levels?
The Board sets KPI measures at threshold, target and stretch levels. A participant
must achieve the threshold level to entitle them to any payment for an individual KPI.
The stretch level is the greatest performance outcome for an individual KPI.
What is the value of the STI
award that can be earned?
Incentive payments are based on a percentage of a senior executive’s fixed remuneration.
The Chief Executive Officer can earn up to a maximum of 100% of his fixed remuneration.
How are the performance
conditions assessed?
The value of the award that can be earned by other senior executives is up to a maximum
of 45% of their fixed remuneration.
The KPIs are reviewed against an agreed target.
The Board assesses the extent to which KPIs were met for the period after the close
of the relevant financial year and once results are finalised. The Board assesses senior
executive performance on the Chief Executive Officers recommendation. The Board
assesses the achievement of the KPIs for the Chief Executive Officer.
Is there a threshold level of
performance or hurdle before
an STI is paid?
Yes. At the end of Beach’s financial year there is a calculation of return on capital. There
is also a calculation of a one year relative total shareholder return against the ASX 200
Energy Index. Refer to table 5 below.
What happens if an STI
is awarded?
Table 5: Two-tiered test
Measures
One year Relative Total Shareholder Return
against ASX 200 Energy Total > Index Return
of the Performance Period
Green
Yellow
Red
>Index
return
=Index
return
5%
5%
<5%
1.
Return on capital (ROC) is based on statutory NPAT/average total equity (being the average total
equity at the beginning and end of the financial year).
The Board may use its discretion to award or reduce an STI if any one measure is in the
red band or both measures are in the yellow band.
On achievement of the relevant KPIs, Beach pays half of the STI award in cash. Beach
includes cash awards in its financial statements for the relevant financial year. Beach pays
cash awards after the end of its financial year, usually in September.
Beach issues the remaining half of the STI award value in performance rights.
Performance rights vest over one and two years if the senior executive remains employed
by Beach at each vesting date. If a senior executive leaves Beach before the vesting date
the performance rights lapse. The Board may exercise its discretion for early vesting if
the senior executive leaves Beach due to death or disability. The Board may exercise its
discretion for early vesting in the event of a change of control of Beach. The Board also
has a general discretion to allow early vesting of performance rights. The Board needs
exceptional circumstances to consider exercising that general discretion.
Annual Report 2018 63
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
STI Performance for the year
At the completion of the financial year the Board tested each senior executive’s performance against the STI performance
conditions set for the year after exercising its discretion in relation to the hurdle measures. The results of the two hurdle
measures were:
Measures
1 year Relative Total Shareholder Return against ASX 200 Energy Total Return Index
(Index Return) at the end of the Performance Period
Return on capital at the end of the Performance Period
FY18 Hurdle Measure
220.1%
11.1%
Both results fell in the green band.
The percentage of the maximum STI that will be paid or forfeited for the period for each executive KMP was as follows:
Mr Kay 81%/19%, Mr Engelbrecht 82%/18%, Ms Summers 66%/34%, Mr Marshall 74%/26%, Mr Barker 74%/26%,
Mr Schrull 78%/22%.
The STI awards made reflect Beach’s strong performance for FY18, including:
§ The achievement of full year production at the high end of guidance.
§ Beach’s reserves replacement exceeding stretch targets.
§ Beach’s statutory NPAT exceeding stretch targets.
Further detail regarding the outcomes of the Company related performance conditions that make up 60% of the STI KPIs
is provided in Table 6.
Table 6: Outcome of FY18 STI Company KPIs
STI Measure and weighting
Link to Beach’s strategy
Performance and score
Production – 15 %
Production is fundamental to Beach’s earnings
and profit.
Full year production was 19.0 MMboe and at the
high end of guidance of 18.1 – 19.1 MMboe.
Reserves replacement – 15%
Replacing reserves is fundamental to Beach’s
longer term financial sustainability.
Safety – measured by total
recordable injury frequency
rate (TRIFR) – 10%
Beach’s key value is that ‘Safety takes
precedence in everything we do’. Beach is
focused is on ensuring it and its contractors
operate in a safe manner. Beach has included
other safety and reliability measures in the
annual Sustainability Report. The Sustainability
Report is available on Beach’s website.
Score – met.
Beach’s 1P reserves increased by 152 MMboe
(+405%) to 190 MMboe and 2P reserves
increased by 239 MMboe (+320%) to
313 MMboe. Approximately one third of
the increase in 2P reserves was due to the
underlying performance of the assets and
exploration/appraisal success. 2P reserves life
increased from 7 years at the end of FY17 to
11 years at the end of FY18.
Score – met.
Beach’s safety record in the financial year did
not meet the threshold target of 2.5 TRIFR.
Score – not met.
Environment – 5%
Beach strives to reduce the environmental
impact of its activities.
Beach partially achieved environmental targets
for FY18.
Statutory NPAT – 15%
Statutory NPAT reflects Beach’s earning
performance. Stretch performance is
achieved through strong sales revenue
and cost reduction.
Score – partially met.
In FY18 Beach delivered NPAT of $198.8m.
Score – met.
STI performance rights issued in 2016 to senior executives converted automatically to shares because they remained
employed by the Company on 1 July 2018. A total of 460,259 shares were issued.
64 Beach Energy Limited | ABN 20 007 617 969
STI performance rights and CEO commencement rights issued or in operation in FY18
The fair value of services received in return for STI rights and the Chief Executive Officer’s commencement rights (see
Table 16) granted is measured by reference to the fair value of STI rights granted calculated using the Binomial or Black-
Scholes Option Pricing Models. The contractual life of the STI rights is used as an input into the valuation model. The
expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the
rights), adjusted for any expected changes to future volatility due to publicly available information. The risk free rate is
based on Commonwealth Government bond yields relevant to the term of the performance rights.
Table 7: STI performance rights and CEO commencement rights issued or in operation in FY18
Number of securities issued
Share price
Exercise price
Vesting period (years)
Term (years)
Dividend yield
Fair value of security at grant date
Total fair value at grant date
CEO Rights
2016 Rights
2016 Rights
Vested
2 May 2018
Retention to
be tested on
1 July 2018
Retention to
be tested on
1 July 2019
414,547
0.665
–
2.0
2.0
1.6%
0.644
561,057
561,060
1.140
–
0.6
0.6
1.6%
1.130
1.140
–
1.6
1.6
1.6%
1.112
267,010
633,714
623,730
Long Term Incentive (LTI)
What is the LTI?
The LTI is an equity based ‘at risk’ incentive plan. The LTI aims to reward results that promote
long term growth in shareholder value or total shareholder return (TSR).
Beach offers LTIs to senior executives at the discretion of the Board.
How does the LTI link to
Beach’s key purpose?
The LTI links to Beach’s key purpose by aligning the longer term ‘at risk’ incentive rewards
with outcomes that match shareholder objectives and interests by:
§ benchmarking shareholder returns against a group of companies considered alternative
How are the number of rights
issued to senior executives
calculated
What equity based grants are
given and are there plan limits?
What is the performance
condition?
Why choose this
performance condition?
investments to Beach;
§ giving share based rather than cash based rewards to executives. This links their own rewards
to shareholder expectations of dividends and share price growth.
The number of performance rights granted to the executives under the LTI is calculated
as (fixed remuneration at 1 July [year] x [insert] % / Market Value). The Market Value is the
market value of a fully paid ordinary share in the Company, calculated using a five day VWAP,
up to and including the date the performance rights are granted. This method of calculating
the number of performance rights does not discount for the value of anticipated dividends
during the performance period.
Beach grants performance rights using the formula set out above. If the performance
conditions are met, senior executives have the opportunity to acquire one Beach share for
every vested performance right. There are no plan limits as a whole for the LTI. This is due to
the style of the plan and advice by external remuneration consultants about individual plan
limits. Individual limits for the plans that are currently operational are set out in Table 8.
The performance condition is based on Beach’s Total Shareholder Return (TSR) relative to
the ASX 200 Energy Total Return Index. The initial out-performance level is set at the Index
return plus 5.5% compound annual growth rate (CAGR) over the three year performance
period, such that:
§ < the Index return – 0% vesting
§ = the Index return – 50% vesting;
§ Between the Index return and Index + 5.5% – a prorated number will vest;
§ = or > Index return + 5.5% – 100% vesting.
TSR is a measure of the return to shareholders over a period of time through the change in
share price and any dividends paid over that time. The dividends are notionally reinvested to
perform the calculation. Beach chose this performance condition to align senior executive
remuneration with increased shareholder value. The Board has reinforced that alignment by
imposing two more conditions. First, the Board sets a threshold level for the executive to
meet before making an award. Secondly, the Board will not make an award if Beach’s TSR
is negative.
Annual Report 2018 65
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
Is shareholders equity diluted
when shares are issued on
vesting of performance rights
or exercise of options?
The Board has not imposed dilution limits due to the structure of the LTI plan and the number
of rights on issue. Any dilution would be minimal. If all the current performance rights vested at
30 June 2018, shareholders equity would have diluted by 0.29% (FY17 – 0.36%). It has been the
practice of the Board when there is an entitlement to shares on vesting of performance rights to
issue new shares. Yet there is provision for the buying of shares on market if the Board considers
that dilution of shareholder equity may be material.
What happens to LTI
performance rights on a
change of control?
The Board reserves the discretion for early vesting in the event of a change of control of the
Company. Adjustments to a participant’s entitlements may also occur in the event of a company
reconstruction and certain share issues.
Table 8: Details of LTI equity awards issued, in operation or tested during the year
Details
Type of grant
2014, 2015, 2016 and 2017 Performance Rights including CEO 2015 LTI performance rights
Performance rights
Calculation of grant limits for
senior executives
Max LTI is 100% of Total Fixed Remuneration (TFR) for Chief Executive Officer
Max LTI is 50% of TFR for other senior executives
Grant date
2017 Performance Rights
1 Dec 2017/9 April 2018
2016 Performance Rights
1 Dec 2016/21 February 2017
2015 Performance Rights
1 Dec 2015/19 May 2016 for Chief Executive Officer only
2014 Performance Rights
1 Dec 2014
Issue price of performance rights Granted at no cost to the participant
Performance period
Note: the date immediately
after the after the end of the
performance period is the first
date that the performance rights
vest and become exercisable
2017 Performance Rights
1 Dec 2017 – 30 Nov 2020
2016 Performance Rights
1 Dec 2016 – 30 Nov 2019
2015 Performance Rights
1 Dec 2015 – 30 Nov 2018
2014 Performance Rights
1 Dec 2014 – 30 Nov 2017
Expiry / lapse
Expiry date
Performance rights lapse if vesting does not occur on testing of performance condition
2017 Performance Rights
30 Nov 2022
2016 Performance Rights
30 Nov 2021
2015 Performance Rights
30 Nov 2020
2014 Performance Rights
30 Nov 2019
Exercise price on vesting
Not applicable – provided at no cost
What is received on vesting?
One ordinary share in Beach for every performance right
Status
2017 Performance Rights
In progress
2016 Performance Rights
In progress
2015 Performance Rights
In progress
2014 Performance Rights
Testing completed. Resulted in partial vesting of performance rights.
66 Beach Energy Limited | ABN 20 007 617 969
Details of LTI performance rights (including CEO 2015 LTI performance rights) issued or in operation in FY18
The fair value of services received in return for LTI performance rights granted is measured by reference to the fair
value of LTI performance rights granted calculated using the Binomial or Black-Scholes Option Pricing Models. The
estimate of the fair value of the services received for the LTI performance rights and options issued are measured with
reference to the expected outcome, which may include the use of a Monte Carlo simulation. The contractual life of the
LTI performance rights is used as an input into this model. Expectations of early exercise are incorporated into a Monte
Carlo simulation method where applicable. The expected volatility is based on the historic volatility (calculated based on
the weighted average remaining life of the rights or options), adjusted for any expected changes to future volatility due
to publicly available information. The risk free rate is based on Commonwealth Government bond yields relevant to the
term of the performance rights.
Table 9: Details of LTI performance rights (including CEO 2015 LTI performance rights) issued or in operation in FY18
2014
Rights
2015
Rights
2015
CEO Rights
2016
Rights
2017
Rights
Partially
vested
30 Nov 2017
To be tested
in December
2018
To be tested
in December
2018
To be tested
in December
2019
To be tested
in December
2020
Number of securities issued
1,667,671
2,787,763
Share price
Volatility (average)
Vesting Period (years)
Term (years)
Risk free rate
Dividend yield
0.975
35.100%
3.0
5.0
2.310%
3.080%
0.525
46.155%
3.0
5.0
2.160%
2.860%
815,401
0.665
46.155%
3.0
5.0
2.160%
2.860%
2,964,391
2,675,625
0.862
57.101%
3.0
5.0
2.538%
2.404%
1.187
54.778%
3.0
5.0
2.511%
1.657%
Fair value of security at grant date (weighted
average)
0.471
0.257
0.326
0.426
0.669
Total fair value at grant date
785,640
717,570
265,495
1,264,186
1,788,754
Employment agreements – senior executives
The senior executives have employment agreements with Beach.
The provisions relating to duration of employment, notice periods and termination entitlements of the senior executives
are as follows:
Chief Executive Officer
The Chief Executive Officer’s employment agreement commenced with effect 2 May 2016 and is ongoing until terminated
by either Beach or Mr Kay on six months’ notice. Beach may terminate the Chief Executive Officer’s employment at
any time for cause (for example, for serious breach) without notice. In certain circumstances Beach may terminate the
employment on notice of not less than three months for issues concerning the Chief Executive Officer’s performance that
have not been satisfactorily addressed.
The Chief Executive Officer may also give one month’s notice of termination of his employment in the event that Beach
requires him to permanently transfer to another location outside of Adelaide. If this occurs, Beach will pay to the Chief
Executive Officer a retirement payment equal to six months’ salary.
Other senior executives
Other senior executives have employment agreements that are ongoing until terminated by either Beach from between
3 and 12 months’ notice or the senior executive upon giving three months’ notice. Beach may terminate a senior
executive’s appointment for cause (for example, for serious breach) without notice. Beach must pay any amount owing
but unpaid to the employee whose services have been terminated at the date of termination, such as accrued leave
entitlements. In certain circumstances Beach may terminate employment on notice of not less than three months for
issues concerning the senior executives performance that have not been satisfactorily addressed. If Beach terminates
the senior executive’s appointment other than for cause or he or she resigns due to a permanent relocation of his or her
workplace to a location other than Adelaide, then they are entitled to an amount up to one times their final annual salary.
Details of total remuneration for KMP calculated as required under the Corporations Act for FY17 and FY18
Legislative and IFRS reported remuneration for KMP
Details of the remuneration package by value and by component for senior executives in the reporting period and the
previous period are set out in Table 10. These details differ from the actual payments made to senior executives for the
reporting period that are set out in Table 1.
Annual Report 2018 67
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
Table 10: Senior executives’ remuneration for FY17 and FY18 as required under the Corporations Act
SHORT TERM EMPLOYEE BENEFITS
SHARE BASED PAYMENTS 3
Fixed
Remunera-
tion 1
$
Year
Annual
Leave
$
LTI
Rights
$
STI
Rights
$
Termin-
ation
$
STI 2
OTHER
LONG
TERM
BENEFITS
Long
Service
Leave
$
Total
at risk
%
Total
issued in
equity
%
Total
$
2018 903,000
903,000
2017
15,633 364,662
341,100
64,314
369,378
763,410
199,661 458,399
9,812 2,425,895
1,972,611
6,137
Name
M V Kay
M Engelbrecht
D Summers 4
G J Barker 5
L Marshall 6
J L Schrull 7
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
525,000
567,929
285,797
–
198,764
–
257,138
–
475,000
353,629
17,163
20,400
17,899
–
11,985
–
16,542
–
19,182
17,919
(469)
15,158
Former Senior Executives
K Hollingsworth 8 2018
2017
180,073
284,880
C L Oster 9
R A Rayner 10
M R Squire 11
M R Dodd 12
2018
2017
2018
2017
2018
2017
2018
2017
235,878
471,755
12,259
(18,790)
241,265 (19,079)
16,474
524,127
230,861
430,525
261,866
522,280
5,838
(535)
800
(13,732)
77,096
27,667
150,428
–
9,613
–
5,863
–
8,887
–
94,527
–
172,129
75,338
41,640
–
28,172
–
35,698
–
133,603
40,898
–
35,158
–
121,236
–
70,600
41,055
114,136
–
93,098
49,908
–
33,874
–
35,044
–
46,858
11,677
(8,604)
8,604
58,821
113,713
(77,922)
126,339
56,047
89,589
(27,493)
27,493
–
–
–
–
–
–
–
–
–
–
–
–
3,342
1,135
13,414
–
974
–
974
–
3,024
1,027
945,158
692,469
418,271
–
279,632
–
354,283
–
772,194
425,150
272,571
344,557
362,572
701,222
741,204
758,478
415,489
647,157
62
51
43
15
27
–
25
–
23
–
36
13
N/A
13
N/A
34
N/A
29
N/A
34
N/A
19
34
22
47
33
24
4
14
–
14
–
12
–
18
3
N/A
2
N/A
16
N/A
17
N/A
14
N/A
4
23
9
– 102,328
–
–
59,283
–
–
–
(757)
757
(3,669)
13,308
– 653,873
–
–
(56,933)
20,938
73,518
–
–
–
8,170
13,442
– 399,593
–
–
(7,000) 627,766
644,520
15,381
Total
2018 3,794,642
97,753
816,959
613,007 1,165,529 1,155,794 (28,649) 7,615,035
2017 4,058,125
101,208
891,564
604,743 458,399
–
72,125
6,186,164
1. Fixed remuneration comprises base salary and superannuation and ad hoc payments treated as remuneration, relocation and vehicle allowances.
2. This amount represents the cash portion of the STI for FY18, which are expected to be paid in October 2018. It also includes additional cash bonuses
totalling $125,000 awarded by the Board to selected KMP in recognition of the successful transaction to acquire Lattice Energy Limited.
3. In accordance with the requirements of the Australian Accounting Standards, remuneration includes a proportion of the notional value of equity
compensation granted or outstanding during the year. The fair value of equity instruments which do not vest during the reporting period is
determined as at the grant date and is progressively expensed over the vesting period. The amount included as remuneration is not related to or
indicative of the benefit (if any) that individuals may ultimately realise should the rights vest. The fair value of the rights as at the date of their grant
has been determined in accordance with principles set out in Note 4 to the Financial Statements.
4. Ms Summers became a KMP on 31 January 2018 when she commenced as Chief Operating Officer. Figures shown for Ms Summers are for the period
31 January 2018 to 30 June 2018. She was not a KMP in FY17.
5. Mr Barker became a KMP on 19 February 2018 when he commenced as Group Executive Development. Figures shown for Mr Barker are for the
period 19 February 2018 to 30 June 2018. He was not a KMP in FY17. ‘Fixed remuneration’ includes a relocation payment made to Mr Barker.
6. Mr Marshall became a KMP on 15 January 2018 when he commenced as Group Executive Corporate Strategy and Commercial. Figures shown for
Mr Marshall are for the period 15 January 2018 to 30 June 2018. He was not a KMP in FY17. ‘Fixed remuneration’ includes a relocation payment made
to Mr Marshall.
7. Mr Schrull became a KMP on 3 January 2017 when he commenced as Group Executive Exploration & Development. FY17 figures shown for Mr Schrull
are for the period 3 January 2017 to 30 June 2017.
8. Mr Hollingsworth became a KMP on 5 December 2016 when he commenced as Group Executive Human Resources. FY17 figures shown for
Mr Hollingsworth are for the period 5 December 2016 to 30 June 2017. Mr Hollingsworth ceased to be a KMP on 31 December 2017 as part of a
corporate restructure following the acquisition of Lattice Energy Ltd. His employment by Beach ended on 4 January 2018. FY18 figures shown for
Mr Hollingsworth are for the period 1 July 2017 to 4 January 2018.
9. Ms Oster ceased to be a KMP on 31 December 2017 as part of a corporate restructure following the acquisition of Lattice Energy Ltd. FY18 figures
shown for Ms Oster are for the period 1 July 2017 to 31 December 2017. A termination payment of $644,184 was made to Ms Oster during FY18 but
after she ceased to be a KMP.
10. Mr Rayner ceased to be a KMP on 15 December 2017. FY18 figures shown for Mr Rayner are for the period 1 July 2017 to 15 December 2017.
11. Mr Squire ceased to be a KMP on 15 January 2018 when Mr Marshall commenced in the role as Group Executive Corporate Strategy and Commercial.
FY18 figures for Mr Squire are for the period 1 July 2017 to close of business 14 January 2018.
12. Mr Dodd ceased to be a KMP on 31 December 2017. FY18 figures for Mr Dodd are for the period 1 July 2017 to 31 December 2017.
68 Beach Energy Limited | ABN 20 007 617 969
Remuneration policy for non-executive directors
The fees paid to non-executive directors are determined using the following guidelines. Fees are:
§ not incentive or performance based but are fixed amounts;
§ determined by reference to the nature of the role, responsibility and time commitment required for the performance
of the role including membership of board committees;
§ are based on independent advice and industry benchmarking data; and
§ driven by a need to attract a diverse and well-balanced group of individuals with relevant experience and knowledge.
The remuneration of Beach non-executive directors is within the aggregate annual limit of $1,500,000 approved by
shareholders at the 2016 annual general meeting.
The remuneration for non-executive directors comprises directors’ fees, board committee fees and superannuation
contributions to meet Beach’s statutory superannuation obligations.
Directors who perform extra services for Beach or make any special exertions on behalf of Beach may be remunerated for
those services in addition to the usual directors’ fees. Non-executive directors are also entitled to be reimbursed for their
reasonable expenses incurred in the performance of their directors’ duties.
Details of the fees payable to non-executive directors for Board and committee membership are set out in Table 11.
Table 11: Non-executive directors’ fees and board committee fees per annum
BOARD 1
BOARD COMMITTEE
Chairman /
Deputy Chairman
$
Member
$
Chairman
Audit
$
Member
Audit
$
Chairman
Remuneration
and Nomination
$
Member
Remuneration
and Nomination
$
Chairman Risk,
Corporate
Governance and
Sustainability
$
Member Risk,
Corporate
Governance and
Sustainability
$
275,000 /
121,000
110,000
25,000
15,000
25,000
15,000
15,000
10,000
1. The Chairman does not receive additional fees for committee work. The fees shown are inclusive of the statutory superannuation contribution.
Annual Report 2018 69
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
Table 12: Non-executive directors’ remuneration for FY17 and FY18
Name
G S Davis 1
P J Bainbridge 2
C D Beckett 3
F R V Bennett 4
J D McKerlie 5
R J Richards 6
R K Stokes 7
P S Moore 8
J C Morton 9
Total
Directors Fees
(inc committee fees)
$
Superannuation
$
275,000
250,000
100,500
82,500
142,466
132,420
52,667
130,898
114,155
96,271
116,521
42,447
114,155
93,462
105,957
–
44,178
–
1,065,599
827,998
–
–
24,500
35,000
13,534
12,580
5,003
12,435
10,845
18,729
11,070
4,032
10,845
8,879
10,066
–
4,197
–
90,060
91,655
Year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Total
$
275,000
250,000
125,000
117,500
156,000
145,000
57,670
143,333
125,000
115,000
127,591
46,479
125,000
102,341
116,023
–
48,375
–
1,155,659
919,653
1. No superannuation contributions were made on behalf of Mr Davis. Director’s fees for Mr Davis are paid to a related entity. Mr Davis does not receive
additional fees for committee work.
2. Mr Bainbridge is chair of the Risk, Corporate Governance and Sustainability Committee.
3. Mr Beckett is Deputy Chairman and chair of the Remuneration and Nomination Committee. He is a member of the Risk, Corporate Governance and
Sustainability Committee.
4. Ms Bennett retired as a director on 23 November 2017. Until her retirement she was chair of the Audit Committee and a member of the Risk,
Corporate Governance and Sustainability Committee.
5 Mr McKerlie is a member of the Audit Committee.
6. Mr Richards is a member of the Audit Committee. He was chair of the Audit Committee from 23 November 2017 to 21 February 2018.
7. Mr Stokes is a member of the Remuneration and Nomination Committee.
8. Dr Moore became a member of the Risk, Corporate Governance and Sustainability Committee on 23 November 2017.
9. Ms Morton commenced as a director on 21 February 2018. She became chair of the Audit Committee on that date.
Other KMP disclosures
The following two tables show the movements during the reporting period in shares and performance rights over ordinary
shares in the Company held directly, indirectly or beneficially by each KMP and their related entities.
70 Beach Energy Limited | ABN 20 007 617 969
Performance rights held by KMP
The following table details the movements during the reporting period in performance rights over ordinary shares in the
Company held directly, indirectly or beneficially by each KMP and their related entities.
Table 13: Movements in performance rights held by key management personnel
Rights
CEO
M V Kay
Senior executives
M Engelbrecht
D Summers
G J Barker
L Marshal
J L Schrull
Former senior executives
K Hollingsworth
C L Oster
R A Rayner
M R Squire
M R Dodd
Total
Opening
balance
Granted
Rights exercised /
rights vested
Other1
Closing
balance
2,279,060
1,439,850
(414,547)
304,879
–
–
–
275,843
203,253
941,211
1,045,700
858,953
302,959
6,211,858
378,129
320,960
217,845
225,365
294,893
225,989
363,228
–
331,483
–
–
–
–
–
–
–
(203,074)
(225,618)
(185,326)
–
–
–
–
–
–
–
3,304,363
683,008
320,960
217,845
225,365
570,736
(429,242)
(1,101,365)
(820,082)
(1,005,110)
(302,959)
–
–
–
–
–
3,797,742
(1,028,565)
(3,658,758)
5,322,277
1. Relates to rights that did not vest due to performance conditions not being met and were forfeited during the year and changes resulting from
individuals ceasing to be KMPs during the period.
Annual Report 2018 71
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
The following table details the movements during the reporting period in ordinary shares in the Company held directly,
indirectly or beneficially by each KMP and their related entities.
Table 14: Shareholdings of key management personnel
565,956
121,277
Ordinary Shares
Directors
G S Davis
P J Bainbridge
C D Beckett
F R V Bennett
J D McKerlie
R K Stokes
R J Richards
P S Moore
J C Morton
Senior executives
M V Kay
M Engelbrecht
D Summers
G J Barker
L Marshall
J L Schrull
Former senior executives
K Hollingsworth
C L Oster
R A Rayner
M R Squire
M R Dodd
Total
Opening
balance
126,186
97,250
41,929
100,075
349,868
–
147,776
–
–
–
–
–
–
–
–
89,352
106,157
–
121,932
1,746,481
Purchased1
Sold
Issued upon
vesting of
performance
rights
Other2
27,040
20,840
23,985
21,444
74,972
–
31,667
22,500
50,000
–
–
–
–
–
–
15,332
22,748
–
–
–
–
–
–
(300,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
414,547
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
203,074
225,618
185,326
–
(307,758)
(354,523)
(185,326)
(121,932)
Closing
balance
153,226
118,090
65,914
121,519
124,840
–
179,443
22,500
50,000
1,101,780
–
–
–
–
–
–
–
–
–
–
431,805
(300,000)
1,028,565
(969,539)
1,937,312
Includes shares issued under entitlement offer.
1.
2. Relates to changes resulting from individuals ceasing to be KMPs during the period, or expiration of employee incentive plan shares.
Mr Kay commenced as Chief Executive Officer on 2 May 2016. He was offered retention and commencement rights in partial
recognition of incentives foregone from his previous employment. The rights are detailed in the table below and in the release
to ASX in the announcement of his appointment on 12 January 2016.
Table 15: Commencement rights for CEO
GRANTED
VESTED
Number
Maximum
value
Number
Maximum
value
Lapsed
Retention and commencement rights in partial recognition
of incentives forgone for previous employment
M V Kay
Total
414,547
414,547
267,010
267,010
414,547
414,547
267,010
267,010
–
–
72 Beach Energy Limited | ABN 20 007 617 969
Specific details of the number of LTI and STI performance rights and CEO commencement and retention rights issued,
vested and lapsed in FY18 for KMP are set out below in Table 16.
Table 16: Details of LTI and STI Performance Rights and CEO rights
Fair Value
$
Granted
Vested
Lapsed
–
–
–
295,396
295,397
849,057
–
(414,547)
–
–
–
–
1,439,850
(414,547)
1,185,147
267,010
Date of grant
19 May 2016
19 May 2016
1 Dec 2016
1 Dec 2017
1 Dec 2017
1 Dec 2017
Performance
rights on
issue at
30 June 2017
815,401
414,547
1,049,112
–
–
–
2,279,060
Name
M V Kay
Total
Total ($)
M Engelbrecht
1 Dec 2016
304,879
1 Dec 2017
1 Dec 2017
1 Dec 2017
–
–
–
304,879
Total
Total ($)
D Summers
9 Apr 2018
Total
Total ($)
L Marshall
Total
Total ($)
G J Barker
Total
Total ($)
J L Schrull
Total
Total ($)
M R Dodd
Total
Total ($)
–
–
–
–
–
–
275,843
–
–
–
275,843
9 Apr 2018
9 Apr 2018
21 Feb 2017
1 Dec 2017
1 Dec 2017
1 Dec 2017
1 Dec 2016
302,959
0.467
302,959
0.800
320,960
320,960
256,672
0.800
225,365
0.326
0.644
0.467
1.130
1.112
0.616
0.467
1.130
1.112
0.616
0.800
0.218
1.130
1.112
0.616
0.218
1.130
1.112
–
65,243
65,244
247,642
378,129
298,796
225,365
180,224
217,845
217,845
174,211
–
35,418
35,418
224,057
294,893
217,420
–
–
–
–
30,447
30,447
K Hollingsworth
21 Feb 2017
203,253
Total
Total ($)
C L Oster
1 Dec 2017
1 Dec 2017
1 Dec 2017
–
–
–
203,253
1 Dec 2014
1 Dec 2015
225,412
441,841
1 Dec 2016
273,958
1 Dec 2017
1 Dec 2017
1 Dec 2017
–
–
–
0.616
165,095
225,989
169,953
–
–
–
70,351
70,351
0.471
0.257
0.467
1.130
1.112
0.616
222,526
(203,074)
(22,338)
–
–
–
–
–
(441,841)
(273,958)
(70,351)
(70,351)
(222,526)
Total
Total ($)
941,211
363,228
(203,074)
(1,101,365)
294,769
95,668
546,878
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(302,959)
(302,959)
141,391
(203,253)
(30,447)
(30,447)
(165,095)
(429,242)
214,201
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Performance
rights on
issue at
30 June 2018
Date
performance
rights vest
and become
exercisable
815,401
–
1,049,112
295,396
295,397
849,057
1 Dec 2018
2 May 2018
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
3,304,363
304,879
1 Dec 2019
65,243
65,244
1 Jul 2018
1 Jul 2019
247,642
1 Dec 2020
683,008
320,960 1 Dec 2020
320,960
225,365
1 Dec 2020
225,365
217,845
1 Dec 2020
217,845
275,843
35,418
35,418
224,057
570,736
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
1 Dec 2019
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
1 Dec 2017
1 Dec 2018
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
Annual Report 2018 73
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION REMUNERATION REPORT (AUDITED)
FOR THE YEAR ENDED 30 JUNE 2018
Table 16: Details of LTI and STI Performance Rights and CEO rights
Name
Date of grant
Performance
rights on
issue at
30 June 2017
Fair Value
$
Granted
Vested
Lapsed
Performance
rights on
issue at
30 June 2018
Date
performance
rights vest
and become
exercisable
R A Rayner
1 Dec 2014
250,436
1 Dec 2015
490,892
1 Dec 2016
304,372
1,045,700
Total
Total ($)
M R Squire
1 Dec 2014
205,712
1 Dec 2015
403,226
1 Dec 2016
250,015
1 Dec 2017
1 Dec 2017
1 Dec 2017
–
–
–
0.471
0.257
0.467
0.471
0.257
0.467
1.130
1.112
0.616
–
–
–
–
–
–
–
–
64,202
64,203
203,078
(225,618)
(24,818)
–
–
(490,892)
(304,372)
(225,618)
(820,082)
106,289
280,098
(185,326)
(20,386)
–
–
–
–
–
1 Dec 2017
1 Dec 2018
1 Dec 2019
1 Dec 2017
–
–
–
–
–
–
–
–
–
–
403,226
1 Dec 2018
250,015
1 Dec 2019
64,202
1 Jul 2018
64,203
1 Jul 2019
203,078
1 Dec 2020
Total
Total ($)
858,953
331,483
(185,326)
(20,386)
984,724
269,007
87,307
9,604
Looking ahead – Remuneration and related issues for 2019
Human capital management
FY19 will see the continued deployment of the leadership for high performance framework and leadership program. All
leaders will be enrolled in and commence program attendance. The program commences with an assessment of the leader’s
leadership style and the organisational climate they create. It then offers development and concludes with a re-survey of the
leadership style and organisational climate.
Review of total fixed remuneration for 2019
The Board approved an increase in the total fixed remuneration of the CEO to $1,200,000 effective 1 July 2018.
Review of STI structure for senior executives
The Board have made some changes to the FY19 STI measures, including:
§ The hurdle measure for return on capital (ROC) will increase from 5% to > or = 7%. Refer to Table 17 below;
§ The total weighting of safety and environment measures in FY18 was 15% (10% personal safety and 5% environmental).
This total weighting of 15% remains unchanged in FY19, however, an additional safety measure (process safety) has been
added for FY19, resulting in changes to the individual weightings of measures. In FY19, personal safety will comprise
5% weighting (down from 10% in FY18), environment will comprise 5% weighting (unchanged from FY18) and process
safety will be included as a measure for the first time (and allocated a weighting of 5%).
§ The inclusion of a process safety measure is standard in all international oil companies and most Australian based operators
and will allow us to compare/benchmark our performance to other operators locally and globally. Process Safety Events are
measured by Loss of Primary Containment events – which tend to occur with greater frequency in gas processing facilities.
The measure has been included to reflect Beach’s changed risk profile as a result of the acquisition of the gas facility,
offshore gas wellhead platforms and gas pipelines in the Beach portfolio as a result of the Lattice acquisition.
Table 17: FY19 hurdle measures
Measures
1 year Relative Total Shareholder Return against ASX 200 Energy Total Return Index (Index Return)
at the end of the Performance Period
Return on capital 1 at the end of the Performance Period
FY19 Hurdle Measure
> or = to Index Return
> or = to 7%
1. Return on capital (ROC) is based on statutory NPAT/average total equity (being the average total equity at the beginning and end of the financial year).
Review of non-executive director fees
For FY19 fees payable to the Chair of the Risk and Corporate Governance and Sustainability Committee will increase from
$15,000 to $25,000. Fees payable to members of that Committee will increase from $10,000 to $15,000. The increase will make
the fees for each Board Committee the same, reflecting that the time required of the members of each Committee is the same.
There will be no change to Board fees for FY19.
74 Beach Energy Limited | ABN 20 007 617 969
DIRECTORS’
DECLARATION
FOR THE YEAR ENDED 30 JUNE 2018
1.
In the directors’ opinion:
(a) the financial statements and notes set out on pages 77 to 116 are in accordance with the Corporations Act 2001,
including:
(i) complying with accounting standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its
performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that Beach will be able to pay its debts as and when they become due
and payable.
2. The attached financial statements are in compliance with International Financial Reporting Standards, as noted in the
Basis of Preparation which forms part of the financial statements.
3. At the time of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group identified in note 22 will be able to meet any obligations or liabilities to which they are, or may become, subject
by virtue of the deed of cross guarantee described in note 22.
4. The directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required
by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001 on
behalf of the directors.
G S Davis
Chairman
Adelaide
20 August 2018
Annual Report 2018 75
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION FULL YEAR
FINANCIAL REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the
Financial Statements
Basis of preparation
Results for the year
1. Operating segments
2. Revenue and other income
3. Expenses
4. Employee benefits
5. Taxes
6. Earnings per share
Capital employed
7. Inventories
8. Property, plant and equipment
9. Petroleum assets
10. Exploration and evaluation assets
11. Interests in joint operations
12. Carrying value of oil and gas properties
13. Provisions
14. Commitments for expenditure
Financial and risk management
15. Finances and borrowings
16. Cash flow reconciliation
17. Financial risk management
Equity and group structure
18. Contributed equity
19. Reserves
20. Dividends
21. Subsidiaries
22. Deed of cross guarantee
23. Parent entity financial information
24. Related party disclosures
25. Disposal group held for sale
26. Business combination
Other information
27. Contingent liabilities
28. Remuneration of auditors
29. Subsequent events
Signed reports
Independent auditors report
76 Beach Energy Limited | ABN 20 007 617 969
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Sales revenue
Cost of sales
Gross profit
Other revenue
Other income
Other expenses
Operating profit before financing costs
Interest income
Finance expenses
Profit before income tax expense
Income tax (expense)/benefit
Net profit after tax
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Net change in fair value of available-for-sale financial assets
Net change in hedging reserve
Net gain/(loss) on translation of foreign operations
Tax effect relating to components of other comprehensive income
Other comprehensive (loss)/income, net of tax
Total comprehensive income after tax
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form part of these financial statements.
CONSOLIDATED
Note
2(a)
3(a)
2(a)
2(b)
3(b)
15
15
5
5
6
6
2018
$million
1,250.8
(773.8)
477.0
16.6
24.1
(197.6)
320.1
7.0
(43.6)
283.5
(84.7)
198.8
(17.2)
(14.4)
1.6
6.6
(23.4)
175.4
9.16¢
9.14¢
2017
$million
652.6
(463.4)
189.2
13.1
52.6
66.8
321.7
6.9
(20.9)
307.7
79.8
387.5
13.8
–
(0.3)
(2.3)
11.2
398.7
20.38¢
20.35¢
Annual Report 2018 77
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Other
Assets held for sale
Total current assets
Non-current assets
Available-for-sale financial assets
Property, plant and equipment
Petroleum assets
Exploration and evaluation assets
Goodwill
Deferred tax assets
Derivative financial instruments
Other financial assets
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Current tax liabilities
Derivative financial instruments
Liabilities associated with assets held for sale
Total current liabilities
Non-current liabilities
Payables
Provisions
Interest bearing liabilities
Derivative financial instruments
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings/(accumulated losses)
Total equity
The accompanying notes form part of these financial statements.
78 Beach Energy Limited | ABN 20 007 617 969
CONSOLIDATED
Note
2018
$million
2017
$million
16
17
7
17
25
17
8
9
10
26
5
17
17
13
17
25
17
13
15
17
5
18
19
311.2
273.5
94.4
19.0
4.9
21.2
724.2
–
5.5
2,710.2
478.9
83.9
68.8
–
5.3
3,352.6
4,076.8
293.3
39.6
100.2
47.0
2.6
482.7
17.8
766.8
925.7
–
45.8
1,756.1
2,238.8
1,838.0
1,859.1
210.3
(231.4)
1,838.0
348.0
116.0
50.1
0.6
5.5
1.7
521.9
44.4
26.4
959.8
255.2
–
79.3
0.2
5.9
1,371.2
1,893.1
66.5
48.6
10.1
0.6
0.4
126.2
–
216.4
148.0
0.5
–
364.9
491.1
1,402.0
1,558.5
232.2
(388.7)
1,402.0
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Contributed
equity
$million
Note
Retained
earnings /
(accumulated
losses)
$million
Share
based
reserve
payment
$million
Available
for sale
reserve
$million
Foreign
currency
translation
$million
Profit
distribution
reserve
$million
Hedging
reserve
$million
Balance as at
30 June 2016
Profit for the year
Other
comprehensive
income
Total comprehensive
income/(loss) for
the year
Transactions with
owners in their
capacity as owners:
Shares issued during
the year
18
Interim dividend paid 20
Final dividend
paid from profit
distribution reserve
Disposal of foreign
operations
Increase in share
based payments
reserve
Transactions with
owners
Balance as at
30 June 2017
Profit for the year
Other
comprehensive
income
Total comprehensive
income/(loss) for
the year
Transactions with
owners in their
capacity as owners:
Equity raising during
the year
Equity raising costs
(net of tax)
Shares issued during
the year
Final dividend paid
20
18
18
18
20
Interim dividend paid 20
Increase in share
based payments
reserve
Transactions with
owners
Balance as at
30 June 2018
1,548.7
–
–
–
9.8
–
–
–
–
(757.5)
387.5
–
387.5
–
(18.7)
–
–
–
9.8
(18.7)
28.4
–
–
–
–
–
–
–
0.7
0.7
1,558.5
(388.7)
29.1
–
–
–
301.1
(3.8)
3.3
–
–
–
198.8
–
198.8
–
–
–
(18.7)
(22.8)
–
300.6
(41.5)
–
–
–
–
–
–
–
–
1.5
1.5
1,859.1
(231.4)
30.6
The accompanying notes form part of these financial statements.
–
–
–
–
–
–
14.9
–
(14.9)
(14.9)
–
–
–
–
–
–
–
–
3.4
–
69.8
–
11.5
(0.3)
11.5
(0.3)
181.7
–
–
–
–
–
(9.3)
–
–
–
–
–
(53.7)
–
(53.7)
(9.3)
15.8
–
1.6
1.6
–
–
–
–
–
–
–
172.4
–
–
–
–
–
–
–
–
–
–
Total
$million
1,074.5
387.5
11.2
398.7
9.8
(18.7)
(9.3)
(53.7)
0.7
(71.2)
1,402.0
198.8
–
–
–
–
–
–
–
–
–
–
–
–
(10.1)
(23.4)
(10.1)
175.4
–
–
–
–
–
–
–
301.1
(3.8)
3.3
(18.7)
(22.8)
1.5
260.6
17.4
172.4
(10.1)
1,838.0
Annual Report 2018 79
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
Receipts from customers and other
Payments to suppliers and employees
Payments for restoration
Interest received
Financing costs
Derivative (payments)/receipts
Income tax (paid)/refund
Net cash provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for subsurface assets
Payments for exploration
Proceeds from government grants
Sale of joint operations interests
Payments for acquisition of subsidiaries and joint operations, net of cash acquired
Sale of subsidiary, net of cash disposed
Proceeds from sale of non-current assets
Proceeds from sale of equity investments
Purchase of equity investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Costs associated with issue of shares
Proceeds from borrowings
Debt facility establishment costs
Repayment of borrowings
Proceeds from employee incentive loans
Dividends paid
Net cash used in financing activities
Net (decrease)/increase in cash held
Cash at beginning of financial year
Effects of exchange rate changes on the balances
of cash held in foreign currencies
Cash at end of financial year
The accompanying notes form part of these financial statements
CONSOLIDATED
Note
2018
$million
2017
$million
1,350.6
(633.1)
(25.1)
8.4
(15.9)
(7.9)
(14.1)
691.0
(378.0)
(2.2)
5.5
(8.2)
3.3
7.6
16
662.9
319.0
26
25
(46.6)
(183.4)
(90.1)
6.6
1.3
(1,453.0)
–
2.0
32.5
–
(1,730.7)
301.1
(5.0)
950.0
(27.7)
(150.0)
3.3
(41.5)
1,030.2
(37.6)
348.0
0.8
311.2
(32.0)
(78.4)
(49.7)
–
1.3
–
22.9
1.4
–
(17.5)
(152.0)
–
–
–
–
–
1.7
(20.0)
(18.3)
148.7
199.1
0.2
348.0
80 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE
FINANCIAL STATEMENTS
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
BASIS OF PREPARATION
This section sets out the basis upon which the Group’s
(comprising Beach and its subsidiaries) financial
statements are prepared as a whole. Significant accounting
policies and key judgements and estimates of the Group
that summarise the measurement basis used and assist in
understanding the financial statements are described in the
relevant note to the financial statements or are otherwise
provided in this section.
Beach Energy Limited (Beach) is a for profit company
limited by shares, incorporated in Australia and whose
shares are publicly listed on the Australian Securities
Exchange (ASX). The nature of the Group’s operations are
described in the segment note. The consolidated general
purpose financial report of the Group for the financial year
ended 30 June 2018 was authorised for issue in accordance
with a resolution of the directors on 20 August 2018.
This general purpose financial report:
§ Has been prepared in accordance with Australian
Accounting Standards and other authoritative
pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
The financial statements comply with International
Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board.
§ Has been prepared on an accruals basis and is based
on the historical cost convention, as modified by
the revaluation of available-for-sale financial assets,
financial assets and liabilities (including derivative
instruments) at fair value through profit or loss or
other comprehensive income.
§ Is presented in Australian dollars with all amounts
rounded to the nearest hundred thousand dollars unless
otherwise stated, in accordance with ASIC (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 issued
by the Australian Securities and Investment Commission.
§ Has been prepared by consistently applying all
accounting policies to all the financial years presented,
unless otherwise stated.
§ The consolidated financial statements provide
comparative information in respect of the previous
period. Where there has been a change in the
classification of items in the financial statements for
the current period, the comparative for the previous
period has been reclassified to be consistent with the
classification of that item in the current period.
Notes to the financial statements
The notes include information which is required to
understand the financial statements that is material
and relevant to the operations, financial position or
performance of the Group. Information is considered
material and relevant where the amount is significant in
size or nature, it is important in understanding changes
to the operations or results of the Group or it may
significantly impact on future performance.
Key judgements and estimates
In the process of applying the Group’s accounting policies,
management has had to make judgements, estimates and
assumptions about future events that affect the reported
amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates and
the reasonableness of these estimates and underlying
assumptions are reviewed on an ongoing basis. The areas
involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to
the financial statements are found in the following notes:
Note 5 – Taxes
Note 8 – Property, plant and equipment
Note 9 – Petroleum assets
Note 10 – Exploration and evaluation assets
Note 11 – Interests in joint operations
Note 12 – Carrying value of oil and gas properties
Note 13 – Provisions
Basis of consolidation
The consolidated financial statements are those of Beach
and its subsidiaries (detailed in Note 21). Subsidiaries are
those entities that Beach controls as it is exposed, or
has rights, to variable returns from its involvement with
the subsidiary and has the ability to affect those returns
through its power over the subsidiary. In preparing the
consolidated financial statements, all transactions and
balances between Group companies are eliminated on
consolidation, including unrealised gains and losses
on transactions between Group companies. Where
unrealised losses on intra-group asset sales are reversed
on consolidation, the underlying asset is also tested for
impairment from a group perspective. Profit or loss and
other comprehensive income of subsidiaries acquired
or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date
of disposal, as applicable. The acquisition of subsidiaries is
accounted for using the acquisition method of accounting.
Foreign currency
Both the functional and presentation currency of Beach
is Australian dollars. Some subsidiaries have different
functional currencies which are translated to the
presentation currency. Transactions in foreign currencies
are initially recorded in the functional currency by applying
the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are retranslated at the foreign exchange
rate ruling at the reporting date. Foreign exchange
differences arising on translation are recognised in the
profit or loss. Nonmonetary assets and liabilities that are
measured in terms of historical cost in a foreign currency
are translated using the exchange rate at the date of
the initial transaction. Nonmonetary assets and liabilities
denominated in foreign currencies that are stated at fair
value are translated to the functional currency at foreign
exchange rates ruling at the dates the fair value was
determined. Foreign exchange differences that arise on
the translation of monetary items that form part of the
net investment in a foreign operation are recognised in
equity in the consolidated financial statements. Revenues,
expenses and equity items of foreign operations are
translated to Australian dollars using the exchange rate
at the date of transaction while assets and liabilities
are translated using the rate at balance date with
differences recognised directly in the Foreign Currency
Translation Reserve.
Annual Report 2018 81
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION Adoption of new and revised accounting standards
In the current year, the Group has adopted all of the new
and revised Standards and Interpretations issued by the
Australian Accounting Standards Board that are relevant to
its operations and effective for the current annual reporting
period. The adoption of these new and revised Australian
Accounting Standards and Interpretations has had no
significant impact on the Group’s accounting policies or the
amounts reported during the financial year.
Standards, amendments and interpretations to
existing standards that are not yet effective and have
not been adopted early by the Group:
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations
to existing standards have been published but are not
yet effective, and have not been adopted early by the
Group. Management anticipates that all of the relevant
pronouncements will be adopted in the Group’s accounting
policies for the first period beginning after the effective
date of the pronouncement. Information on new standards,
amendments and interpretations that are expected to be
relevant to the Group’s financial statements is provided below.
Year ended 30 June 2019:
AASB 15: Revenue from Contracts with Customers
AASB 15 provides a new basis for recognising revenue
earned from a contract with a customer and supersedes all
current revenue recognition requirements under Australian
Accounting Standards. The standard becomes mandatory for
the Group for the 30 June 2019 financial year and the Group
plans to adopt the new standard on the required effective
date using the full retrospective method.
During the year the Group has undertaken a detailed review
of all its material revenue contracts against the requirements
of AASB 15. From this assessment the Group identified a
number of judgements that required consideration, including
the identification of goods and services provided under a
contract that could be considered as separate performance
obligations (the existence of which could impact the manner
in which revenue is measured and recorded), determining
when the customer obtains control of the delivered
goods and the influence of any customer acceptance
clauses and assessing the effect of variable and estimated
revenue pricing.
Based on the procedures performed to date the Group does
not expect there to be any material timing changes to net
assets upon adoption. The key change currently expected
by the Group is the reclassification from Revenue to Other
Income on settlement differences between actual receipts
from customers and provisionally priced sales. These
differences are currently recorded as Revenue.
AASB 9: Financial Instruments
AASB 9, approved in December 2015, replaces the existing
guidance in AASB 139 Financial Instruments: Recognition
and Measurement. AASB 9 includes revised guidance on
the classification and measurement of financial instruments,
including a new expected credit loss model for calculating
impairment on financial assets, and the new general hedge
accounting requirements.
It also carries forward the guidance on recognition and
derecognition of financial instruments from AASB 139.
AASB 9 is effective for annual reporting periods beginning
on or after 1 January 2018, with early adoption permitted.
From the assessment performed to date, it is known that:
a. Items previously classified as trade and other receivables
will be classified as financial assets at amortised cost or
financial assets at fair value;
b. Based on historical and expected losses of trade and
other receivables, the expected loss model required by
AASB 9 will not have a material impact on the Group as
at 1 July 2018; and
c. All derivatives that currently qualify for hedge
accounting will also represent an effective hedge
under the new AASB 9.
Year ended 30 June 2020: AASB 16: Leases
This standard is applicable to annual reporting periods
beginning on or after 1 January 2019. The standard
replaces AASB 117 ‘Leases’ and for lessees will eliminate
the classifications of operating leases and finance leases.
Subject to exceptions, a ‘right-of-use’ asset will be capitalised
in the statement of financial position, measured as the
present value of the unavoidable future lease payments
to be made over the lease term. The exceptions relate
to short-term leases of 12 months or less and leases of
low-value assets (such as personal computers and small
office furniture) where an accounting policy choice exists
whereby either a ‘right-of-use’ asset is recognised or
lease payments are expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be
recognised, adjusted for lease prepayments, lease incentives
received, initial direct costs incurred and an estimate of
any future restoration, removal or dismantling costs.
Straight-line operating lease expense recognition will be
replaced with a depreciation charge for the leased asset
(included in operating costs) and an interest expense on the
recognised lease liability (included in finance costs). In the
earlier periods of the lease, the expenses associated with
the lease under AASB 16 will be higher when compared to
lease expenses under AASB 117. However, EBITDA (Earnings
Before Interest, Tax, Depreciation and Amortisation) results
will be improved as the operating expense is replaced by
interest expense and depreciation in profit or loss under
AASB 16. For classification within the statement of cash
flows, the lease payments will be separated into both a
principal (financing activities) and interest (either operating
or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor
accounts for leases.
The Group is currently undertaking a detailed review of all
its current contracts against the requirements of AASB 16
and considering relevant industry guidance and is yet to
complete its assessment of which contracts may contain
a lease and what adjustments, if any, are necessary on
adoption of AASB 16. It is therefore not yet possible to
estimate the amount of right-of-use assets and lease
liabilities that will have to be recognised on adoption of the
new standard and how this may affect the Group’s profit or
loss and classification of cash flows going forward.
82 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 RESULTS FOR THE YEAR
This section explains the results and performance
of the Group including additional information about
those individual line items in the financial statements
most relevant in the context of the operations of the
Group, including accounting policies that are relevant
for understanding the items recognised in the financial
statements and an analysis of the Group’s result for
the year by reference to key areas, including operating
segments, revenue, expenses, employee costs, taxation
and earnings per share.
1. Operating segments
The Group has identified its operating segments to be
its South Australian and Western Australian (SAWA),
Victorian and New Zealand interests based on the different
geographical regions and the similarity of assets within
those regions.
This is the basis on which internal reports are provided to
the Chief Executive Officer for assessing performance and
determining the allocation of resources within the Group.
The Group operates primarily in one business, namely the
exploration, development and production of hydrocarbons.
Revenue is derived from the sale of gas and liquid
hydrocarbons. Gas sales contracts are spread across major
Australian and New Zealand energy retailers and industrial
users with liquid hydrocarbon product sales being made
to major multi-national energy companies based on
international market pricing.
Details of the performance of each of these operating
segments for the financial years ended 30 June 2018 and
30 June 2017 are set out as follows:
SAWA
VICTORIA
NEW ZEALAND
TOTAL
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
955.5
652.6
208.2
–
87.1
–
1,250.8
652.6
Segment revenue
Sales revenue
During the year revenue from two customers
amounted to $591.6 million (2017:
$382.3 million from two customers) arising
from sales from SAWA and Victoria segment.
Segment results
Gross segment result before
depreciation, amortisation
and impairment
Depreciation
and amortisation
Reversal of impairment
Impairment expense
Other revenue
Other income
Net financing costs
Other expenses
Profit before tax
Income tax benefit
Net profit after tax
Segment assets
Total corporate and unallocated assets
Total consolidated assets
Segment liabilities
Total corporate and unallocated liabilities
Total consolidated liabilities
Additions and acquisitions of
non current assets
Exploration and evaluation assets
Petroleum assets
Total corporate and unallocated assets
Total additions and acquisitions
of non current assets
576.7
359.3
156.0
(0.9)
56.8
(207.2)
(169.2)
(91.0)
–
(60.5)
309.0
150.0
(2.8)
337.3
–
–
–
–
–
(14.3)
–
–
65.0
(0.9)
42.5
–
–
–
–
–
789.5
358.4
(312.5)
(169.2)
2,124.6
1,317.3
1,073.4
459.0
267.9
330.0
–
–
76.7
276.1
–
3,474.1
112.0
862.5
974.5
46.2
70.8
117.0
419.3
690.9
1,110.2
8.3
–
8.3
0.1
277.4
277.5
–
(60.5)
416.5
16.6
24.1
(36.6)
(137.1)
283.5
(84.7)
198.8
–
–
–
602.7
4,076.8
865.7
1,373.1
2,238.8
531.4
1,830.8
2,362.2
14.5
150.0
(2.8)
336.4
13.1
52.6
(14.0)
(80.4)
307.7
79.8
387.5
1,317.3
575.8
1,893.1
267.9
223.2
491.1
54.5
70.8
125.3
3.4
2,376.7
128.7
Annual Report 2018 83
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 1. Operating segments continued
AUSTRALIA
NEW ZEALAND
TOTAL
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
Non-current assets *
3,005.6
1,231.4
272.9
10.0
3,278.5
1,241.4
* excluding financial assets and deferred taxes.
2. Revenue and other income
The Group’s revenue is recognised and measured at the fair value of consideration received or receivable to the extent that
it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
Revenue is derived primarily from the sale of gas and liquid hydrocarbons and is recognised on the basis of the Group’s
interest in a producing field (“entitlements” method), when the physical product and associated risks and rewards of
ownership pass to the purchaser, which is generally at the time of ship or truck loading, or on the product entering the
relevant pipeline.
Revenue from take or pay contracts is recognised in earnings when the product has been drawn by the customer and
recorded as unearned revenue when not drawn by the customer.
Other operating revenue is recognised at the fair value of the consideration received or receivable, when significant risks
and rewards have been transferred to the buyer or when the service has been performed.
(a) Revenue
Crude oil 1
Gas and gas liquids
– sales gas and ethane
– liquified petroleum gas
– condensate
Sales revenue
Other operating revenue
Total revenue
(b) Other income
Gain on sale of subsidiary (Note 25)
Gain on sale of joint operations interests
Gain on settlement of restoration obligation
Gain on sale of investments
Gain on sale of non-current assets
Gain on adjustments to fair values on acquisition of subsidiary
Government grants received
Foreign exchange gains
Total other income
1.
Inclusive of realised hedge settlements and premiums paid of $10.2 million (2017: $3.3 million in receipts).
CONSOLIDATED
2018
$million
2017
$million
595.0
414.7
416.8
97.5
141.5
1,250.8
16.6
1,267.4
–
–
15.0
5.3
1.0
–
1.2
1.6
24.1
170.8
27.4
39.7
652.6
13.1
665.7
46.9
3.7
–
–
0.6
1.4
–
–
52.6
84 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 3. Expenses
The Group’s significant expenses in operating the business are described below split between cost of sales and other
expenses including impairment, employee benefit expense and corporate and other costs.
(a) Cost of sales
Operating costs
Royalties
Total operating costs
Depreciation of property, plant and equipment
Amortisation of petroleum assets
Total amortisation and depreciation for operations
Third party oil and gas purchases
Change in inventory
Total cost of sales
(b) Other expenses
Impairment
Impairment expense/(reversal) on other property, plant & equipment (Note 8)
Impairment expense/(reversal) on petroleum assets (Note 9)
Impairment of exploration and evaluation assets (Note 10)
Total impairment expense/(reversal)
Other
Employee benefits expense (Note 4)
Loss on derivative financial instruments
Foreign exchange losses
Depreciation of property, plant and equipment
Corporate development costs
Acquisition and integration costs (Note 26)
Corporate expenses
Other expenses
Total other expenses
CONSOLIDATED
2018
$million
2017
$million
273.1
99.5
372.6
81.7
230.8
312.5
75.8
12.9
773.8
1.2
–
87.1
88.3
31.1
13.2
–
2.0
4.0
50.1
8.9
109.3
197.6
179.7
54.0
233.7
55.5
113.7
169.2
36.4
24.1
463.4
3.1
(150.0)
38.3
(108.6)
20.5
3.7
1.7
2.3
6.1
–
7.5
41.8
(66.8)
4. Employee benefits
Provision is made for the Group’s employee benefits liability arising from services rendered by employees to the end of
the reporting period. These benefits include wages, salaries, annual leave and long service leave. Where these benefits
are expected to be settled within 12 months of the reporting date, they are measured at the amounts expected to be paid
when the liabilities are settled. Expenses for non-vesting personal leave are recognised when the leave is taken and are
measured at the rates paid or payable. Liabilities for long service leave and annual leave that is not expected to be taken
wholly before 12 months after the end of the reporting period in which the employee rendered the related service, are
recognised and measured as the present value of the estimated future cash outflows to be made in respect of employees’
services up to the reporting date. The obligation is calculated using expected future increases in wage and salary rates,
experience of employee departures and periods of service. The estimated future payments have been discounted using
Australian corporate bond rates. The obligations are presented as current liabilities in the statement of financial position
if the Group does not have the unconditional right to defer settlement for at least 12 months after the reporting date,
regardless of when the actual settlement is expected to occur.
Superannuation commitments: Each employee nominates their own superannuation fund into which Beach contributes
compulsory superannuation amounts based on a percentage of their salary.
Termination benefits: Termination benefits may be payable when employment is terminated before the normal retirement
date, without cause, or when an employee accepts voluntary redundancy in exchange for these benefits. Beach
recognises termination benefits when it is demonstrably committed to making these payments.
Annual Report 2018 85
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 4. Employee benefits continued
Equity settled compensation:
Employee Incentive Plan – The Group operates an Employee Incentive Plan, approved by shareholders. Shares are allotted to
employees under this plan at the Board’s discretion. Shares acquired by employees are funded by interest free non-recourse
loans for a term of 10 years which are repayable on cessation of employment with the consolidated entity or expiry of the
loan term. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an
expense over the vesting period with a corresponding increase in equity. The fair value of shares issued is determined with
reference to the latest ASX share price. Rights are valued using an appropriate valuation technique such as the Binomial or
Black-Scholes Option Pricing Models which takes into account the vesting conditions.
The following employee shares are currently on issue
Balance as at 30 June 2016
Loans repaid during the financial year
Balance as at 30 June 2017
Loans repaid during the financial year
Balance as at 30 June 2018
Number
9,319,956
(2,616,315)
6,703,641
(3,021,983)
3,681,658
No new shares were issued to employees during the financial year, pursuant to this plan.
The closing ASX share price of Beach fully paid ordinary shares at 29 June 2018 was $1.755 as compared to $0.575 as at 30 June 2017.
Incentive Rights – The Group operates an Executive Incentive Plan (EIP) for KMP providing both Short Term Incentives (STIs) and
Long Term Incentives (LTIs). The STI is part of ‘at risk’ remuneration offered to senior executives. It measures individual and Company
performance over a 12 month period coinciding with Beach’s financial year. It is provided in equal parts of cash and equity that may
or may not vest subject to additional retention conditions. It is offered annually to senior executives at the discretion of the Board.
The LTI is an equity based ‘at risk’ incentive plan. The LTI is intended to reward efforts and results that promote long term growth
in shareholder value or total shareholder return (TSR). LTIs are offered to senior executives at the discretion of the Board. The fair
value of performance rights issued are recognised as an employee benefits expense with a corresponding increase in equity. The fair
value of the performance rights are measured at grant date and recognised over the vesting period during which the KMP become
entitled to the performance rights. The fair value of the STIs is measured using the Black-Scholes Option Pricing Model and the fair
value of the LTIs is measured using Monte Carlo simulation, taking into account the terms and conditions upon which these rights
were issued. Details of the key assumptions used in determining the valuation of both STI’s and LTI’s issued during the year are
included in the remuneration report.
Movements in unlisted performance rights are set out below:
Balance at beginning of period
Issued during the period
Cancelled during the period
Vested during the period
Balance at end of period
CONSOLIDATED
2018
number
2017
number
6,820,796
4,114,642
6,814,929
2,964,391
(3,097,646)
(2,314,988)
(1,213,891)
(643,536)
6,623,901
6,820,796
On 5 December 2017, Beach issued 1,122,117 STI unlisted performance rights and 2,029,050 LTI unlisted performance
rights under the EIP. 561,057 of the STI performance rights vested on 1 July 2018, and the remaining 561,060 STI rights
vest on 1 July 2019, subject to the holder of the rights remaining employed with Beach on the vesting dates. The LTI
performance rights, which expire on 30 November 2022, are exercisable for nil consideration and are not exercisable before
1 December 2020. A further 963,475 LTI unlisted performance rights were issued on 9 April 2018 under the EIP, which expire
on 30 November 2022, are exercisable for nil consideration and are not exercisable before 1 December 2020.
Employee benefits expense
Short term benefits
Post employment benefits
Share based payments
Total
86 Beach Energy Limited | ABN 20 007 617 969
CONSOLIDATED
2018
$million
2017
$million
25.5
4.1
1.5
31.1
16.7
3.1
0.7
20.5
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 5. Taxes
Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or
other comprehensive income. The income tax expense or benefit for the period is the tax payable on the current period’s
taxable income, which is based on the notional income tax rates, adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements, and to unused tax losses. These temporary differences are recognised at the tax rate expected to
apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively
enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable
temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary
differences arising from the initial recognition of an asset or a liability. Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise
those temporary differences and losses.
Recognised in the statement of profit or loss
Current tax expense
Current financial year tax expense
Under/(Over) provision in the prior year
Other
Total current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Under provision in the prior year
Recognition of capital losses
Recognition of deferred taxes
Total deferred tax benefit
Total income tax expense/(benefit)
Numerical reconciliation between tax expense and prima facie tax expense
Reconciliation of the prima facie income tax expense calculated on profit before
income tax expense included in the statement of profit or loss
Profit before income tax expense
Prima facie income tax expense/(benefit) using an income tax rate at 30% (2017: 30%)
Adjustment to income tax expense due to:
Recognition of deferred taxes future periods
Recognition of deferred tax asset current period
Tax impact on disposal of overseas assets
Non-deductible expenses
Losses of controlled foreign entities not recognised
Sale of investments
Difference in tax rate
Recognition of capital losses
Non assessable income
Under/(Over) provision in the prior year
Income tax expense/(benefit) on pre-tax profit
CONSOLIDATED
2018
$million
2017
$million
101.0
3.3
–
104.3
(17.8)
(0.1)
(1.7)
–
(19.6)
84.7
283.5
85.0
–
–
–
5.2
0.2
(1.6)
(0.6)
(1.7)
(5.0)
3.2
84.7
6.0
(4.3)
0.1
1.8
–
–
(2.3)
(79.3)
(81.6)
(79.8)
307.7
92.3
(79.3)
(73.2)
(14.2)
0.4
0.8
–
–
(2.3)
–
(4.3)
(79.8)
Annual Report 2018 87
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 5. Taxes continued
Tax effects relating to each component of other comprehensive income ($million)
Group
Available-for-sale financial assets
Hedging reserve
Exchange difference on translating foreign
controlled entities
Before
tax
amount
(17.2)
(14.4)
1.6
2018
Tax
expense
2.3
4.3
–
Net of
tax
amount
(14.9)
(10.1)
Before
tax
amount
13.8
–
1.6
(0.3)
2017
Tax
benefit
(2.3)
–
–
Net of
tax
amount
11.5
–
(0.3)
Beach and its wholly owned Australian subsidiaries are consolidated for Australian income tax purposes with Beach
responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. Beach has
entered into tax sharing agreements with its wholly owned subsidiaries whereby each company in the group contributes
to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.
Accordingly, as head entity, Beach is responsible for recognising current tax liabilities, current tax assets and deferred tax
assets from unused tax losses and credits of members of the tax consolidated group. Deferred tax liabilities and deferred tax
assets arising from temporary differences of the members of the tax consolidated group are allocated amongst the members
of the tax consolidated group using the “Separate Taxpayer within Group” approach in accordance with Interpretation 1052,
Tax Consolidation Accounting.
Movement in Group deferred tax balances ($million)
Current financial year
Oil & Gas Assets
Investments
Assets and Liabilities Held For Sale
Provisions
Employee benefits
Other Items
Inventories
Tax assets/(liabilities) before set-off
Set-off of deferred tax assets in Australia
Net deferred tax asset/(liabilities)
Balance
1 July 2017
Recognised
in income
9.5
–
(0.5)
81.4
2.0
(12.6)
(0.5)
79.3
14.1
(2.3)
1.0
3.0
(0.7)
4.5
0.1
19.7
–
–
Acquired
(240.7)
–
–
148.0
3.9
5.0
–
(83.8)
–
–
Recognised
in OCI/
Equity
Balance
30 June
2018
Deferred
Tax
Asset
Deferred
Tax
Liability
–
2.3
–
–
–
5.5
–
7.8
–
–
(217.1)
–
0.5
232.4
5.2
2.4
(0.4)
23.0
55.1
–
0.5
232.4
5.2
20.4
–
(272.2)
–
–
–
–
(18.0)
(0.4)
313.6
(290.6)
–
–
(244.8)
68.8
244.8
(45.8)
Previous financial year
Oil & Gas Assets
Investments
Assets and Liabilities Held For Sale
Provisions
Employee benefits
Other Items
Inventories
Tax assets/(liabilities) before set-off
Set-off of deferred tax assets in Australia
Recognise net deferred tax assets balance
Net deferred tax assets/(liabilities)
Balance
1 July 2016
Recognised
in income
Recognised
in OCI
Balance
30 June
2017
Deferred
Tax Asset
Deferred
Tax
Liability
69.0
–
4.2
77.6
2.3
4.0
2.0
159.1
(159.1)
–
(59.5)
2.3
(4.7)
3.8
(0.3)
(16.6)
(2.5)
(77.5)
159.1
81.6
–
(2.3)
–
–
–
–
–
(2.3)
9.5
–
(0.5)
81.4
2.0
(12.6)
(0.5)
79.3
61.5
–
–
81.4
2.0
4.8
–
149.7
(70.4)
(52.0)
–
(0.5)
–
–
(17.4)
(0.5)
(70.4)
70.4
(2.3)
79.3
79.3
–
88 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 Petroleum Resource Rent Tax (PRRT): PRRT is recognised as an income tax under AASB 112 – Income Taxes. From
1 July 2012, the PRRT regime was extended to all Australian onshore oil and gas projects. Accounting for PRRT involves
judging the impact of the combination of production licences into PRRT projects, the taxing point of projects, the
measurement of the starting base of projects, the impact of farm-ins, the deductibility of expenditure and the impact of
legislative amendments. A deferred tax asset is recognised in relation to the carry forward deductible PRRT expenditure
of projects only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. The group has determined the carry forward deductible PRRT expenditure of projects including augmentation on
expenditure categories in the calculation of future taxable profit when assessing the extent to which a deferred tax asset
should be recognised in the financial statements. Deferred tax assets in respect of PRRT are reduced to the extent that
it is no longer probable that the related tax benefit will be realised. Beach has previously applied for and was granted a
PRRT combination certificate by the Minister for Industry in respect of its Cooper Basin projects, and has inherited other
combined projects through the acquisition of the Lattice group. The government has also enacted legislation which will
enable contract liabilities with third parties to be apportioned based on the extent that the expenditure relates to the
petroleum project. Due to the substantial value of carry forward deductible PRRT expenditure at 30 June 2018, the Group
does not expect to pay PRRT in the short to medium term on all of its projects that are subject to the PRRT regime.
Deferred tax assets have not been recognised in respect of the following items:
Tax losses (capital)
Foreign tax losses (revenue)
PRRT (net of income tax)
Total
CONSOLIDATED
2018
$million
2017
$million
18.7
12.5
4,277.3
4,308.5
20.4
15.6
1,132.1
1,168.1
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST). The net amount of
GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are
included in the statement of cash flows on a gross basis.
Annual Report 2018 89
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 6. Earnings per share (EPS)
The Group presents basic and diluted EPS for its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shares for the dilutive effect, if any, of outstanding share rights which have been
issued to employees.
Earnings after tax used in the calculation of EPS is as follows:
Basic EPS and Diluted EPS
2018
$million
2017
$million
198.8
387.5
Weighted average number of ordinary shares and potential ordinary shares used in the calculation of EPS is as follows:
Basic EPS
Share rights
Diluted EPS
2018
Number
2017 1
Number
2,170,981,952 1,901,467,353
2,969,133
5,136,462
2,176,118,414 1,904,436,486
1. Restated to included an additional 35,586,753 shares for the bonus element impact of arising from the rights issue to existing shareholders in the
current period.
Calculation of EPS is as follows:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
9.16¢
9.14¢
20.38¢
20.35¢
Potential ordinary shares relating to performance rights that were not considered dilutive during the period as vesting would
not have occurred based on the status of the required vesting conditions at the end of the relevant reporting period were nil
(2017: 3,851,663). Accordingly, these have been excluded from the calculation of diluted EPS.
A further 460,259 shares were issued on 2 July 2018 upon vesting of unlisted performance rights previously issued pursuant
to the Beach Energy Ltd Executive Incentive Plan for the 2016 Short Term Incentive Offer following satisfaction of the
retention condition.
90 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 CAPITAL EMPLOYED
This section details the investments made by the Group in exploring for and developing its petroleum business including
inventories, property plant and equipment, petroleum assets, joint operations and any related restoration provisions as
well as an assessment of asset impairment and details of future commitments.
7. Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and selling expenses. Cost is determined as follows:
(i) Drilling and maintenance stocks, which include plant spares, consumables, maintenance and drilling tools used for
ongoing operations, are valued at weighted average cost; and
(ii) Petroleum products, which comprise extracted crude oil, liquefied petroleum gas, condensate and naphtha stored in
tanks and pipeline systems and process sales gas and ethane stored in sub-surface reservoirs, are valued using the
absorption cost method in a manner which approximates specific identification.
Petroleum products
Drilling and maintenance stocks
Less provision for obsolescence
Total current inventories at lower of cost and net realisable value
Petroleum products included above which are stated at net realisable value
CONSOLIDATED
2018
$million
2017
$million
70.5
38.0
(14.1)
94.4
0.9
40.0
24.2
(14.1)
50.1
1.3
8. Property, plant and equipment (PPE)
PPE is measured at cost less depreciation and impairment losses. The carrying amount of PPE is reviewed bi-annually for
impairment (refer Note 12). The cost of PPE constructed within the Group includes the cost of materials, direct labour,
borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the
asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other
repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. The assets
residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on
disposals are determined by comparing proceeds with the carrying amount and are included in the profit or loss.
The depreciable amount of all PPE excluding freehold land is depreciated using a straight line basis over their useful lives
commencing from the time the asset is held ready for use. The depreciation rates used in the current and previous period
for each class of depreciable asset are:
§ 2% for the corporate head office building;
§ 4-33% for other equipment
Annual Report 2018 91
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 8. Property, plant and equipment (PPE) continued
Land and buildings
Land and buildings at cost
Less accumulated depreciation
Total land and buildings
Reconciliation of movement in land and buildings:
Balance at beginning of financial year
Impairment of land and buildings (Note 12)
Reclassification to assets held for sale1 (Note 25)
Depreciation expense
Total land and buildings
Plant and equipment
Plant and equipment
Plant and equipment under construction
Less accumulated depreciation
Total plant and equipment
Reconciliation of movement in other plant and equipment:
Balance at beginning of financial year
Additions
Reclassification to assets held for sale1 (Note 25)
Depreciation expense
Total plant and equipment
Total property, plant and equipment
CONSOLIDATED
2018
$million
2017
$million
–
–
–
22.6
(1.2)
(21.0)
(0.4)
–
13.1
2.7
(10.3)
5.5
3.8
3.4
(0.2)
(1.5)
5.5
5.5
24.3
(1.7)
22.6
26.2
(3.1)
–
(0.5)
22.6
14.4
0.3
(10.9)
3.8
4.6
1.0
–
(1.8)
3.8
26.4
1. Head office building classified as held for sale comprises land ($8.5 million), buildings ($12.5 million) and other equipment ($0.2 million) forming part
of the sale.
9. Petroleum assets
Petroleum assets are stated at cost less accumulated depreciation and impairment charges. They include initial cost,
with an appropriate proportion of fixed and variable overheads, to acquire, construct, install or complete production and
infrastructure facilities such as pipelines and platforms, capitalised borrowing costs, transferred exploration and evaluation
assets and development wells. Subsequent capital costs, including major maintenance, are included in the asset’s carrying
amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The depreciable amount of all onshore production facilities, field and other equipment
excluding freehold land is depreciated using a straight line basis over the lesser of their useful lives and the life of proved
and probable reserves commencing from the time the asset is held ready for use. Offshore production facilities and field
equipment are depreciated based on a units of production method using proved and probable reserves. The depreciation
rates used in the current and previous period for each class of depreciable asset are 4-50% for onshore production facilities,
field and other equipment.
Subsurface assets are amortised using the units of production method over the life of the area according to the rate
of depletion of the proved and probable reserves. Retention of petroleum assets is subject to meeting certain work
obligations/commitments as detailed in Note 14. The carrying amount of Petroleum assets is reviewed bi-annually for
impairment as detailed in Note 12. The assets residual values and useful lives are reviewed, and adjusted if appropriate,
at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount
and are included in the profit or loss.
92 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 Estimates of reserve quantities
The estimated quantities of proved and probable hydrocarbon reserves reported by the Group are integral to
the calculation of amortisation (depletion), depreciation expense and to assessments of possible impairment or
impairment reversal. Estimated reserve quantities are based upon interpretations of geological and geophysical
models and assessment of the technical feasibility and commercial viability of producing the reserves. Beach prepares
its petroleum reserves estimates in accordance with the Petroleum Resources Management System (PRMS) published
by the Society of Petroleum Engineers. All estimates of petroleum reserves reported by Beach are prepared by, or
under the supervision of, a qualified petroleum reserves and resources evaluator. To ensure the integrity and reliability
of data used in the reserves estimation process, the raw data is reviewed and quality controlled by senior professional
production, reservoir, petrophysical and geological staff at Beach. During each petroleum reserves review, this data
is updated, analysed and checked against the previous year’s data. These assessments require assumptions to be
made regarding future development and production costs, commodity prices, exchange rates and fiscal regimes.
Reserves at 30 June 2018 have been independently audited by RISC advisory. The estimates of reserves may change
from period to period as the economic assumptions used to estimate the reserves can change from period to period,
and as additional geological data is generated during the course of operations. Estimates are reviewed at least
annually or when there are significant changes in the circumstances impacting specific assets or asset groups. These
changes may impact depreciation, asset carrying values, restoration provisions and deferred tax balances. If proved
and probable reserves estimates are revised downwards, earnings could be affected by higher depreciation expense
or an immediate write-down of the asset’s carrying value.
Field land and buildings
Land and buildings at cost
Less accumulated depreciation
Total land and buildings
Reconciliation of movement in field land and buildings:
Balance at beginning of financial year
Additions
Acquisition of subsidiaries and joint operation interests
Transfer from production facilities and field equipment
Transfer from subsurface assets
Depreciation expense
Total field land and buildings
CONSOLIDATED
2018
$million
2017
$million
87.9
(27.3)
60.6
22.3
32.8
10.1
1.0
4.1
(9.7)
60.6
41.9
(19.6)
22.3
18.7
5.7
–
–
–
(2.1)
22.3
Annual Report 2018 93
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 9. Petroleum assets continued
Production facilities and field equipment
Production facilities and field equipment
Production facilities and field equipment under construction
Less accumulated depreciation
Total production facilities and field equipment
Reconciliation of movement in production facilities, field and other equipment:
Balance at beginning of financial year
Additions
Acquisition of subsidiaries and joint operation interests
Impairment reversal on production facilities and field equipment (Note 12)
Reclassification from assets held for sale (Note 25)
Transfer to field land and buildings
Depreciation expense
Disposals
Total production facilities and field equipment
Subsurface assets
Subsurface assets at cost
Subsurface assets under construction
Less accumulated amortisation
Total subsurface assets
Reconciliation of movement in subsurface assets
Balance at beginning of financial year
Additions
Acquisition of subsidiaries and joint operation interests
Increase/(decrease) in restoration
Transfer from exploration and evaluation assets
Transfer to field land and buildings
Reclassification from assets held for sale (Note 25)
Impairment reversal on petroleum assets (Note 12)
Foreign exchange movement
Amortisation expense
Total subsurface assets
Total petroleum assets
CONSOLIDATED
2018
$million
2017
$million
1,851.5
5.2
(595.2)
1,261.5
378.7
6.1
949.8
–
–
(1.0)
(72.1)
–
1,261.5
2,617.7
118.1
(1,347.7)
1,388.1
558.8
169.0
634.6
28.0
232.1
(4.1)
–
–
0.5
(230.8)
1,388.1
2,710.2
859.6
40.5
(521.4)
378.7
381.4
22.4
–
27.8
0.7
–
(53.4)
(0.2)
378.7
1,569.0
106.7
(1,116.9)
558.8
418.9
75.5
–
(32.5)
68.1
–
20.3
122.2
–
(113.7)
558.8
959.8
94 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 10. Exploration and evaluation assets
Expenditure on exploration and evaluation is accounted for in accordance with the area of interest method. Areas of
interest are based on a geological area. These costs are only carried forward to the extent that they are expected to be
recouped through the successful development or sale of the area or where activities in the area have not yet reached a
stage that permits reasonable assessment of the existence of proved and probable hydrocarbon reserves. The costs of
acquiring interests in new exploration and evaluation licences are capitalised. The costs of drilling exploration wells are
initially capitalised pending the results of the well. Costs are expensed where the well does not result in the successful
discovery of economically recoverable hydrocarbons and the recognition of an area of interest. Subsequent to the
recognition of an area of interest, all further evaluation costs relating to that area of interest are capitalised.
Upon approval for the commercial development of an area of interest, accumulated expenditure for the area of interest is
transferred to petroleum assets.
Area of interest
An area of interest (AOI) has previously been defined by the Group as an individual geographical basin whereby the
presence of hydrocarbons is considered favourable or proved to exist. In the current financial year, this definition has been
further redefined to more accurately reflect the exploration activities and the correlation of the costs to the resulting
reserves that are being evaluated as being an area defined by major geological structural elements that has a discrete
exploration strategy and has largely independent costs for exploration and evaluation from other geological areas.
This change in definition has resulted in a number of new discrete areas of interest being established within existing
basins. This represents a change in accounting estimate and has resulted in an impairment charge of $87.1 million in the
current financial year on AOI’s where there is now either no tenure and/or ongoing exploration program.
For the financial year ended 30 June 2017, the carrying value of exploration and evaluation assets was formally assessed,
resulting in the recognition of an impairment loss of $38.3 million.
Impairment of exploration and evaluation assets
The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful
development and commercial exploitation, or alternatively, sale of the respective AOI. Each potential or recognised
AOI is reviewed half-yearly to determine whether economic quantities of reserves have been found or whether further
exploration and evaluation work is underway or planned to support continued carry forward of capitalised costs. Where
a potential impairment is indicated, assessment is performed using a fair value less costs to dispose method to determine
the recoverable amount for each AOI to which the exploration and evaluation expenditure is attributed.
This assessment requires management to make certain estimates and apply judgement in determining assumptions as
to future events and circumstances, in particular, the assessment of whether economic quantities of reserves have been
found. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised
expenditure under the policy, the Group concludes that it is unlikely to recover the expenditure by future exploitation or
sale, then the relevant capitalised amount will be written off to the statement of profit or loss. Retention of exploration
assets is subject to meeting certain work obligations/exploration commitments as detailed in Note 14.
Government grants received in relation to the drilling of exploration wells are recognised as a reduction in the carrying
value of the exploration permit as expenditure is incurred.
Exploration and evaluation assets at beginning of financial year
Additions
Increase in restoration
Acquisition of subsidiaries and joint operation interests (Note 26)
Transfer to petroleum assets
Reclassification from/(to) assets held for sale (Note 25)
Impairment of exploration and evaluation assets (Note 10)
Disposal of joint operation interests
Foreign exchange movement
Total exploration and evaluation assets
CONSOLIDATED
2018
$million
2017
$million
255.2
77.2
29.4
436.3
(232.1)
–
(87.1)
–
–
478.9
319.6
51.5
5.1
–
(68.1)
(1.6)
(38.3)
(13.0)
–
255.2
Annual Report 2018 95
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 11. Interests in joint operations
Exploration and production activities are conducted through joint arrangements governed by joint operating agreements,
production sharing contracts or similar contractual relationships. A joint operation involves the joint control, and often the
joint ownership, of one or more assets contributed to, or acquired for the purpose of the joint operation and dedicated to the
purposes of the joint operation. The assets are used to obtain benefits for the parties to the joint operation. Each party may
take a share of the output from the assets and each bears an agreed share of expenses incurred. Each party has control over
its share of future economic benefits through its share of the joint operation. The interests of the Group in joint operations are
brought to account by recognising in the financial statements the Group’s share of jointly controlled assets, share of expenses
and liabilities incurred, and the income from the sale or use of its share of the production of the joint operation in accordance
with the Group’s revenue policy.
Accounting for interests in other entities
Judgement is required in assessing the level of control obtained in a transaction to acquire an interest in another entity;
depending upon the facts and circumstances in each case, Beach may obtain control, joint control or significant influence
over the entity or arrangement. Judgement is applied when determining the relevant activities of a project and if joint control
is held over them. Relevant activities include, but are not limited to, work program and budget approval, investment decision
approval, voting rights in joint operating committees, amendments to permits and changes to joint arrangement participant
holdings. Transactions which give Beach control of a business are business combinations.
If Beach obtains joint control of an arrangement, judgement is also required to assess whether the arrangement is a joint
operation or a joint venture. If Beach has neither control nor joint control, it may be in a position to exercise significant
influence over the entity, which is then accounted for as an associate.
The Group has a direct interest in a number of unincorporated joint operations with those significant joint operation interests
shown below.
Joint Operation
Oil and Gas interests
Australia
Cooper Basin (South Australia)
Ex PEL 92 (PRLs 85-104)
Ex PEL 104 (PRLs 15,136-141)
Ex PEL 513 (PRLs 191-206)
Ex PEL 632 (PRLs 131-134)
PEL 630
SA Fixed Factor Area
SA Unit
Cooper Basin (Queensland)
Naccowlah Block
ATP 299 (Tintaburra)
Total 66 Block
SWQ Unit
Otway Basin (Victoria/Tasmania)
BassGas Project
Perth Basin (Western Australia)
Beharra Springs
Waitsia Gas Project
International
Taranaki Basin (New Zealand)
Kupe Gas Project
Principal activities
% INTEREST
2018
2017
Oil production
Oil production
Gas production and exploration
Gas production and exploration
Oil and gas exploration
Oil and gas production
Oil production
Oil production
Oil production
Oil production
Gas production
Gas production
Gas production
Gas production
Gas production
75.0
40.0
40.0
40.0
50.0
33.4
33.4
38.5
40.0
30.0
39.9
53.8
67.0
50.0
50.0
75.0
40.0
40.0
40.0
50.0
20.2
20.2
38.5
40.0
30.0
23.2
–
–
–
–
Details of commitments for expenditure and contingent liabilities incorporating the Group’s interests in joint operations are
shown in Notes 14 and 27 respectively.
96 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 12. Carrying value of oil and gas properties
The carrying amounts of oil and gas properties are
assessed half yearly to determine whether there is an
indication of impairment or impairment reversal for those
assets which have previously been impaired. Indicators
of impairment and impairment reversals include changes
in future selling prices, future costs and reserves. When
assessing potential indicators of impairment or reversals
the Group models scenarios and a range of possible future
commodity prices is considered. If any such indication
exists, the asset’s recoverable amount is estimated.
Petroleum assets are assessed for impairment indicators
and impairments on a cash generating unit (CGU) basis.
Following review of interdependencies between the various
operations within the Group, it has been determined that
the operational CGU’s are Cooper Basin, Perth Basin, OGP,
BassGas and Kupe.
The recoverable amount of an asset or CGU is determined
as the higher of its value in use and fair value less costs of
disposal. Value in use is determined by estimating future
cash flows after taking into account the risks specific to
the asset and discounting it to its present value using an
appropriate discount rate. If the carrying amount of an
asset or CGU exceeds its recoverable amount, the asset or
CGU is written down and an impairment loss is recognised
in the statement of profit or loss. For assets previously
impaired, if the recoverable amount exceeds the carrying
amount and the indicators driving the increase in value
are sustained for a period of time, the impairment loss
is reversed. The carrying amount of the asset or CGU
is increased to the revised estimate of its recoverable
amount, but only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
The Group assessed each CGU to determine whether an
indicator of impairment or impairment reversal existed.
No indicators of impairment or impairment reversal were
identified in the current year.
Future cash flow information used for the value in use
calculation is based on the Group’s latest reserves, budget,
five-year plan and project economic plans.
2018 financial year
Impairment and impairment reversal indicator modelling
In determining whether there is an indicator of impairment
or impairment reversal, in the absence of quoted market
prices, estimates are made regarding the present value of
future cash flows for each CGU. These estimates require
significant management judgement and are subject to
risk and uncertainty, and hence changes in economic
conditions can also affect the assumptions used and the
rates used to discount future cash flow estimates. The
present value of future cash flows for each CGU were
estimated using the assumptions below with reference
to external market forecasts at least bi-annually. The
assumptions applied have regard to contracted prices
and observable market data including forward values and
external market analyst’s forecasts.
For the current financial year, the following assumptions were
used in the assessment of the CGU’s recoverable amounts:
§ Brent oil price (real) of US$74.75/bbl in FY19 and
US$70/bbl for FY20 and beyond.
§ A$/US$ exchange rate of 0.77 in FY19 and 0.75 for FY20
and beyond
§ Pre-tax real discount rate of between 9.4% and 14.4%.
§ Where appropriate the cash flow inputs have been
adjusted to reflect identifiable uncertainty and risk.
2017 financial year
For the financial year ended 30 June 2017, the Group
assessed each CGU to determine whether an indicator
of impairment or impairment reversal existed. Indicators
of impairment or impairment reversal include changes in
future selling prices, future costs and reserves. Following
a formal assessment of the recoverable amount of the
Cooper Basin CGU, taking into account the sensitivity of
the recoverable amount model to key assumptions, and the
market capitalisation of the Company, it was determined that
a reversal of impairment expenses of $150 million should be
booked in relation to Cooper Basin oil and gas assets.
The drivers of the impairment reversal on Cooper Basin
oil and gas assets related to the increase in 2P reserves
together with improvements to the operating and capital
cost assumptions, reflecting improvements made since
the last review.
13. Provisions
A provision for rehabilitation and restoration is provided by
the Group where there is a present obligation as a result
of exploration, development, production, transportation or
storage activities having been undertaken, and it is probable
that an outflow of economic benefits will be required to
settle the obligation. The estimated future obligations
include the costs of removing facilities, abandoning wells
and restoring the affected areas once petroleum reserves
are exhausted. Restoration liabilities are discounted to
present value and capitalised as a component part of
petroleum assets and exploration and evaluation assets.
The capitalised costs are amortised over the life of the
petroleum assets and the provision revised at the end of
each reporting period through the profit or loss as the
discounting of the liability unwinds. The unwinding of
discounting on the provision is recognised as a finance cost.
Estimate of restoration costs
The Group estimates the future removal costs of offshore
oil and gas platforms, production facilities, wells and
pipelines at different stages of the development and
construction of assets or facilities. In most instances,
removal of assets occurs many years into the future.
This requires judgemental assumptions regarding
removal date, future environmental legislation, the
extent of reclamation activities required, the engineering
methodology for estimating cost, future removal
technologies in determining the removal cost, and liability
specific discount rates to determine the present value of
these cash flows.
The provision amount represents the Group’s current best
estimate of its restoration obligations to be performed
in the future based on current industry practice and
expectations. However this will be dependent on approval
by regulatory authorities prior to restoration activities
being undertaken and may be subject to change.
Annual Report 2018 97
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 13. Provisions continued
Estimate of employee entitlements
Long service leave is measured at the present value of benefits accumulated up to the end of the reporting period.
The liability is discounted using an appropriate discount rate. Management requires judgement to determine key
assumptions used in the calculation including future increases in salaries and wages, future on-cost rates and future
settlement dates of employees’ departures.
Current
Other provisions
Employee entitlements
Restoration
Total
Non-Current
Employee entitlements
Restoration
Total
Movement in the Group’s provisions are set out below:
Balance at 1 July 2017
Provision made during the year
Provision paid/used during the year
Unwind of discount
Acquisitions
Net transfer to liabilities held for sale
Balance at 30 June 2018
CONSOLIDATED
2018
$million
2017
$million
4.3
11.4
23.9
39.6
6.0
760.8
766.8
3.9
5.2
39.5
48.6
1.4
215.0
216.4
Restoration
$million
Employee
entitlements
$million
Other
$million
254.5
39.5
(22.8)
14.9
501.2
(2.6)
784.7
6.6
2.1
(4.0)
–
12.7
–
17.4
3.9
0.4
–
–
–
–
4.3
98 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 14. Commitments for expenditure
Capital Commitments
The Group has contracted the following amounts for capital expenditure at the end of the
reporting period for which no amounts have been provided for in the financial statements.
Due within 1 year
Due within 1-5 years
Due later than 5 years
Minimum Exploration Commitments
The Group is required to meet minimum expenditure requirements of various government
regulatory bodies and joint arrangements. These obligations may be subject to renegotiation,
may be farmed out or may be relinquished and have not been provided for in the financial
statements.
Due within 1 year
Due within 1-5 years
Due later than 5 years
CONSOLIDATED
2018
$million
2017
$million
31.1
0.4
–
31.5
56.2
23.5
0.7
80.4
18.3
1.0
–
19.3
7.5
39.9
0.3
47.7
The Group’s share of the above commitments that relate to its interest in joint arrangements are $27.3 million
(2017: $17.8 million) for capital commitments and $31.9 million (2017: $32.6 million) for minimum exploration commitments.
Operating Commitments
The Group has contracted the following amounts for operating expenditure at the end of the reporting period for which
no amounts have been provided for in the financial statements.
Due within 1 year
Due within 1-5 years
Due later than 5 years
CONSOLIDATED
2018
$million
2017
$million
12.3
1.2
–
13.5
11.4
–
–
11.4
Default on permit commitments by other joint arrangement participants could increase the Group’s expenditure
commitments over the forthcoming 5 year period and/or result in relinquishment of tenements. Any increase in the
Group’s commitments that arises from a default by a joint arrangement party would be accompanied by a proportionate
increase in the Group’s equity in the tenement concerned.
Annual Report 2018 99
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION FINANCIAL AND RISK MANAGEMENT
This section provides details on the Group’s debt and related financing costs, interest income, cash flows and the fair values of
items in the Group’s statement of financial position. It also provides details of the Group’s market, credit and liquidity risks and
how they are managed.
15. Finances and borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequent to initial recognition, borrowings
are stated at amortised cost with any difference between cost and redemption being recognised in the profit or loss over
the period of the borrowings on an effective interest basis. Transaction costs are amortised on a straight line basis over the
term of the facility. The unwinding of present value discounting on debt and provisions is also recognised as a finance cost.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for
at least 12 months after the end of the reporting period. Interest income is recognised in the profit or loss as it accrues using
the effective interest method and if not received at balance date, is reflected in the balance sheet as a receivable.
Net finance expenses/(income)
Finance costs 1
Interest expense
Discount unwinding on provision for restoration (Note 13)
Total finance expenses
Interest income
Net finance expenses
Non-current Borrowings
Bank debt
Less debt issuance costs
Total non-current borrowings
CONSOLIDATED
2018
$million
2017
$million
10.6
18.1
14.9
43.6
(7.0)
36.6
950.0
(24.3)
925.7
4.5
5.1
11.3
20.9
(6.9)
14.0
150.0
(2.0)
148.0
1.
Includes expensing of $1.3 million in capitalised debt facility costs on cancellation of previous debt facility.
On 23 November 2017, Beach executed a Syndicated Debt Facility Agreement for a $1,475 million Senior Secured Debt Facility
in order to fund the acquisition of Lattice. The facility is comprised of a $475 million three year term debt facility (Facility A),
$475 million five year term debt facility (Facility B), $450 million five year revolving debt facility (Facility C), and $75 million
Letter of Credit facility (Facility D).
As at 30 June 2018, $475 million of Facility A was drawn, $475 million of Facility B was drawn and Facility C remained fully
undrawn, with $48.3 million of Facility D being utilised by way of bank guarantees. Bank debt bears interest at the relevant
reference rate plus a margin, with the effective interest rate in FY18 of 3.76% (2017: 3.20%).
100 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 16. Cash flow reconciliation
For the purpose of the statement of cash flows, cash includes cash on hand, cash at bank, term deposits with banks, and
highly liquid investments in money market instruments, net of outstanding bank overdrafts. Any investments of the Group
with fixed maturities are stated at amortised cost using the effective interest rate method where it is the Group’s intention
to hold them to maturity.
Reconciliation of cash and cash equivalents
Cash at bank
Term deposits
Cash and cash equivalents
Reconciliation of net profit to net cash provided by operating activities:
Net profit after tax
Less items classified as investing/financing activities:
– Gain on disposal of non-current assets
– Gain on disposal of investments
– Gain on sale of joint operation interests
– Gain on settlement of restoration obligation
– Gain on sale of subsidiary
– Gain on adjustments to fair values on acquisition of subsidiary
– Recognition of deferred tax assets/(liability) on items direct in equity
Add/(less) non-cash items:
– Share based payments
– Depreciation and amortisation
– Impairment expense/(reversal)
– Unrealised hedging (gain)/loss
– Discount unwinding on provision for restoration
– Provision for stock obsolescence movement
– Other
Net cash provided by operating activities before changes in assets and liabilities
Changes in assets and liabilities net of acquisitions / disposal of subsidiaries:
– Decrease/(increase) in trade and other receivables
– Decrease/(increase) in inventories
– Decrease/(increase) in other current assets
– Decrease/(increase) in other non-current assets
– Decrease/(increase) in deferred tax assets
– Increase/(decrease) in provisions
– Increase/(decrease) in current tax liability
– Increase/(decrease) in deferred tax liability
– Increase/(decrease) in trade and other payables
– Increase/(decrease) in net derivatives
Net cash provided by operating activities
CONSOLIDATED
2018
$million
2017
$million
231.2
80.0
311.2
32.3
315.7
348.0
198.8
387.5
(1.0)
(5.3)
–
(15.0)
–
–
7.8
185.3
1.4
314.5
88.3
(1.3)
14.9
–
5.4
608.5
(56.2)
13.4
0.9
0.7
10.5
(36.8)
90.1
(38.1)
52.1
17.8
662.9
(0.6)
–
(3.7)
–
(46.9)
(1.4)
(2.3)
332.6
0.7
171.5
(108.6)
3.6
11.3
0.8
2.2
414.1
(35.9)
26.4
(0.9)
0.7
(79.3)
(6.4)
9.4
–
(9.1)
–
319.0
Annual Report 2018 101
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 17. Financial risk management
The Group’s activities expose it to a variety of financial risks including currency, commodity, interest rate, credit and liquidity
risk. Management identifies and evaluates all financial risks and enters into financial risk instruments such as foreign exchange
contracts, commodity contracts and interest rate swaps to hedge certain risk exposures and minimise potential adverse
effects of these risk exposures in accordance with the Group’s financial risk management policy as approved by the Board.
The Group does not trade in derivative financial instruments for speculative purposes.
The Board actively reviews all hedging on a regular basis with updates provided to the Board from independent
consultants/banking analysts to keep them fully informed of the current status of the financial markets. Reports providing
detailed analysis of all hedging are also continually monitored against the Group’s financial risk management policy.
Financial instruments are initially measured at fair value, net of transaction costs, when the related contractual rights or
obligations exist. Subsequent to initial recognition these instruments are measured as set out below:
Financial assets at fair value through profit or loss: A financial asset is classified in this category if acquired principally for the
purpose of selling in the near term. Realised and unrealised gains and losses arising from changes in the fair value of these
assets are included in profit or loss in the period in which they arise.
Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market and are stated at amortised cost using the effective interest rate method.
Held-to-maturity investments: These investments have fixed maturities, and it is the Group’s intention to hold these
investments to maturity. Any held-to-maturity investments of the Group are stated at amortised cost using the effective
interest rate method.
Available-for-sale financial assets: Available for sale financial assets include any financial assets not capable of being included
in the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from
changes in fair value are taken directly to equity. When an investment is derecognised, the cumulative gain or loss in equity is
reclassified to profit or loss.
Financial liabilities: Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal
payments and amortisation.
Fair value: Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are
applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar
instruments and option pricing models.
Impairment: At each reporting date, the consolidated entity assesses whether there is objective evidence that a financial
instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the
value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are transferred from
the available for sale reserve to be recognised in the profit or loss.
(a) Fair values
Certain assets and liabilities of the Group are recognised in the statement of financial position at their fair value in accordance
with accounting standard AASB 13 Fair Value Measurement. The methods used in estimating fair value are made according to
how the available information to value the asset or liability fits with the following fair value hierarchy:
§ Level 1 – the fair value is calculated using quoted prices in active markets;
§ Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
asset or liability; and
§ Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
102 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 The Group’s financial assets and financial liabilities measured and recognised at fair value is set out below:
CARRYING AMOUNT
FAIR VALUE –
DERIVATIVES
LOANS AND
RECEIVABLES
AVAILABLE-
FOR-SALE
OTHER FINANCIAL
ASSETS/LIABILITIES
TOTAL
Note
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
Financial assets
Measured at fair value
Derivatives
Available-for-sale
Not measured at fair value
Cash
Receivables
Other
Financial liabilities
Measured at fair value
Derivatives
Not measured at fair value
Payables
Interest bearing
liabilities
15
19.0
–
19.0
0.8
–
0.8
–
–
–
–
47.0
47.0
–
–
–
–
–
–
–
1.1
1.1
–
–
–
–
–
–
–
–
–
–
–
273.5
116.0
–
–
273.5
116.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44.4
44.4
–
–
–
–
–
–
19.0
–
19.0
0.8
44.4
45.2
–
–
–
–
–
–
–
–
–
311.2
348.0
311.2
273.5
10.2
348.0
116.0
11.4
–
11.4
359.4
594.9
475.4
–
10.2
321.4
–
–
–
–
47.0
47.0
1.1
1.1
311.1
66.5
311.1
66.5
950.0
1,261.1
150.0
216.5
950.0
1,261.1
150.0
216.5
The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the
previous reporting period.
The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments:
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value. Subsequent to initial recognition, derivative financial
instruments are recognised at fair value using valuation techniques that maximise the use of observable market data
where it is available with any gain or loss on re-measurement to fair value being recognised through profit or loss or
other comprehensive income (OCI) and later reclassified to profit or loss when the hedge item affects profit or loss.
The Group’s derivatives are not traded in active markets, however all significant inputs required to fair value an instrument
are observable (Level 2).
Cash Flow Hedging
The Group has designated 2,782,350 bbls of Brent Crude oil monthly average collar for $55-100-110/bbl, allocated as
481,950 bbls/month for July 2018 – September 2018 and 222,750 bbls/month for October 2018 – March 2019, as cash
flow hedges under AASB 139. The Australian dollar oil option collar contracts are designated as cash flow hedges of
forecast crude oil sales in US dollars, with the hedge effective component of the fair value included in OCI. These forecast
transactions are considered highly probable, comprising about 41% of the Group’s total expected oil sales in US dollars to
June 2019. The cash flow hedges were assessed to be highly effective and a net unrealised loss of $14.4 million is included
in OCI. The Group’s cash flow hedges are not traded in active markets, however all significant inputs required to fair value
an instrument are observable (Level 2).
Available-for-sale financial assets
The fair value of available-for-sale financial assets is determined by reference to their quoted closing price at the reporting
date (Level 1). These investments are measured at fair value using the closing price on the reporting date as listed on
various securities exchanges. Unrealised gains and losses arising from changes in fair value are taken directly to equity.
When an investment is derecognised, the cumulative gain or loss in equity is reclassified to the profit or loss.
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2018
and there have been no transfers between the levels of the fair value hierarchy during the year ended 30 June 2018.
Annual Report 2018 103
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 17. Financial risk management continued
The Group also has a number of other financial assets and liabilities including cash and cash equivalents, receivables and
payables which are recorded at their carrying value which is considered to be a reasonable approximation of their fair value.
(b) Market Risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the entity’s functional currency. The Group sells a portion of its products and commits to some contracts
in US dollars or NZ dollars. Australian dollar oil option contracts are used by the Group to manage its foreign currency risk
exposure. Any foreign currencies held which are surplus to forecast needs are converted to Australian dollars as required.
The Group is exposed to commodity price fluctuations through the sale of petroleum products and other oil-linked contracts.
Option contracts are used by the Group to manage its forward commodity risk exposure. The Group policy is to manage
commodity price exposure by way of Australian dollar denominated oil options for up to 18 months. Changes in fair value of
these derivatives are recognised immediately in the profit or loss and other comprehensive income, having regard to whether
they are defined as accounting hedges.
Commodity Hedges outstanding at 30 June 2018
§ Brent Crude oil monthly average collar for $40-90-105/bbl for 65,000 bbls/month for the period July 2018 –
September 2018 and 30,000 bbls/month for the period October 2018 – December 2018.
§ Brent Crude oil monthly average collar for $40-90-100/bbl for 95,000 bbls/month for the period July 2018 –
September 2018, 65,000 bbls/month for the period October 2018 – December 2018 and 32,500 bbls/month for the
period January 2019 – March 2019.
§ Brent Crude oil monthly average collar for $40-102.5-112.5/bbl for 60,000 bbls/month for the period July 2018 –
March 2019 and 30,000 bbls/month for the period April 2019 – June 2019.
§ Brent Crude oil monthly average collar for $55-100-110/bbl for 595,000 bbls/month for the period July 2018 –
September 2018 and 275,000 bbls/month for the period October 2018 – March 2019.
Commodity Hedges outstanding at 30 June 2017
§ Brent Crude oil monthly average collar for $40-102/bbl for 57,500 bbls/month for the period July 2017 – March 2018.
§ Brent Crude oil monthly average 3-way collar for $50-96-106/bbl for 42,500 bbls/month for the period July 2017 –
September 2017, 37,500 bbls/month for the period October 2017 – December 2017, 30,000 bbls/month for the period
January 2018 – March 2018 and 25,000 bbls/month for the period April 2018 – June 2018.
§ Brent Crude oil monthly average collar for $40-90/bbl for 55,000 bbls/month for the period October 2017 –
December 2017, 110,000 bbls/month for the period January 2018 – June 2018, 65,000 bbls/month for the period July 2018
– September 2018 and 30,000 bbls/month for the period October 2018 – December 2018.
The Group’s interest rate risk arises from the interest bearing cash held on deposit and its bank loan facility which is subject
to variable interest rates. The interest rate profile of the Group’s interest-bearing financial instruments is as follows:
Fixed rate instruments:
Term deposits
Variable rate instruments:
Financial assets
Bank loan facility
CONSOLIDATED
2018
$million
2017
$million
80.0
80.0
231.2
(950.0)
(718.8)
315.7
315.7
32.3
(150.0)
(117.7)
Sensitivity analysis for all market risks
The following table demonstrates the estimated sensitivity to changes in the relevant market parameter, with all variables held
constant, on post tax profit and equity, which are the same as the profit impact flows through to equity. These sensitivities
should not be used to forecast the future effect of a movement in these market parameters on future cash flows which may
be different as a result of the Group commodity hedge book.
104 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 Impact on post-tax profit and equity
A$/$US – 10% increase in Australian/US dollar exchange rate
A$/$US – 10% decrease in Australian/US dollar exchange rate
US$ oil price – increase of $10/bbl
US$ oil price – decrease of $10/bbl
Interest rates – increase of 1%
Interest rates – decrease of 1%
CONSOLIDATED
2018
$million
2017
$million
(39.1)
47.0
57.2
(61.6)
(0.7)
0.7
(24.6)
30.0
51.4
(51.1)
0.9
(0.9)
(c) Credit risk
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions,
and represents the potential financial loss if counterparties fail to perform as contracted. Management monitors credit
risk on an ongoing basis. Gas sales contracts are spread across major Australian and New Zealand energy retailers and
industrial users with liquid hydrocarbon products sales being made to major multi-national energy companies based on
international market pricing.
In addition, receivables balances are monitored on an ongoing basis with the result that Beach’s exposure to bad debts is
not significant. The Group does not hold collateral, nor does it securitise its trade and other receivables. At 30 June 2018,
Beach does not have any material trade and other receivables which are outside standard trading terms which have not
been provided against.
Ageing of Receivables:
Receivables not yet due
Receivables past due
Considered impaired
Total Receivables
CONSOLIDATED
2018
$million
2017
$million
272.1
1.8
(0.4)
273.5
116.0
0.4
(0.4)
116.0
Trade debtors to be settled within agreed terms are carried at amounts due. The collectability of debts is assessed at the
end of the reporting period and specific provision is made for any doubtful accounts.
The Group manages its credit risk on financial assets by predominantly dealing with counterparties with an investment
grade credit rating. Customers who wish to trade on unsecured credit terms are subject to credit verification procedures.
Cash is placed on deposit amongst a number of financial institutions to minimise the risk of counterparty default.
(d) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. The Group aims
at maintaining flexibility in funding to meet ongoing operational requirements, exploration and development expenditure,
and small-to-medium-sized opportunistic projects and investments, by keeping committed credit facilities available.
Details of Beach’s financing facilities are outlined in Note 15.
The Group’s exposure to liquidity risk for each class of financial liabilities is set out below:
CARRYING AMOUNT
LESS THAN 1 YEAR
1 TO 2 YEARS
2 TO 5 YEARS
TOTAL
Note
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
2018
$million
2017
$million
Financial liabilities
Payables
Interest bearing liabilities
15
293.3
–
293.3
66.5
–
66.5
17.8
–
17.8
–
150.0
150.0
–
950.0
950.0
–
–
–
311.1
950.0
1,261.1
66.5
150.0
216.5
Annual Report 2018 105
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION EQUITY AND GROUP STRUCTURE
This section provides information which will help users understand the equity and group structure as a whole including
information on equity, reserves, dividends, subsidiaries, the parent company, related party transactions and other
relevant information.
18. Contributed equity
Ordinary shares are classified as equity. Transaction costs of an equity transaction are accounted for as a reduction to
the proceeds received, net of any related income tax benefit. Transaction costs are the costs that are incurred directly in
connection with the issue of those equity instruments and which would not have been incurred had those instruments not
been issued.
Issued and fully paid ordinary shares at 30 June 2016
Issued during the FY17 financial year
Shares issued on vesting of unlisted performance rights
Shares issued under the terms of the Dividend Reinvestment Plan
Interim 1.0 cent per share dividend
Final 0.5 cent per share dividend
Repayment of employee loans and sale of employee shares
Issued and fully paid ordinary shares at 30 June 2017
Issued during the FY18 financial year
Shares issued on vesting of unlisted performance and CEO rights
Rights issue (3 for 14 pro-rata entitlement offer, net of costs)
Repayment of employee loans and sale of employee shares
Issued and fully paid ordinary shares at 30 June 2018
Number
of Shares
$million
1,860,704,532
1,548.7
643,536
8,151,724
4,312,692
–
–
5.7
2.3
1.8
1,873,812,484
1,558.5
1,213,891
401,543,843
–
–
297.3
3.3
2,276,570,218
1,859.1
In accordance with changes to applicable corporations legislation effective from 1 July 1998, the shares issued do not have a
par value as there is no limit on the authorised share capital of the Company. All shares issued under the Company’s employee
incentive plan are accounted for as a share-based payment (refer Note 4 and 19 for further details). Shares issued under the
Company’s dividend reinvestment plan and employee incentive plan represent non-cash investing and financing activities.
On a show of hands, every person qualified to vote, whether as a member or proxy or attorney or representative, shall have
one vote. Upon a poll, every member shall have one vote for each ordinary share held.
Details of shares and rights issued and outstanding under the Employee Incentive Plan and Executive Incentive Plan are
provided in Note 4.
Dividend Reinvestment Plan
The Board suspended the operation of the Dividend Reinvestment Plan on 21 August 2017 on the basis that this form of
capital management is not currently required at this time.
Capital management
Management is responsible for managing the capital of the Group, on behalf of the Board, in order to maintain an appropriate
debt to equity ratio, provide shareholders with adequate returns and ensure the Group can fund its operations with secure,
cost-effective and flexible sources of funding. The Group debt and capital includes ordinary shares, borrowings and financial
liabilities including derivatives supported by financial assets. Management effectively manages the capital of the Group
by assessing the financial risks and adjusting the capital structure in response to changes in these risks and in the market.
The responses include the management of debt levels, dividends to shareholders and share issues. Debt repayment is
currently a key priority for the Group in order to bring net gearing levels in line with market guidance. The Group net gearing
ratio is 25.9% (2017: net cash). Net gearing has been calculated as financial liabilities (including borrowings and unsecured
bank guarantees) less cash and cash equivalents, as a proportion of these items plus shareholder’s equity.
106 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 19. Reserves
The Share based payments reserve is used to recognise the fair value of shares, options and rights issued to employees
of the Company.
The Available-for-sale reserve is used to recognise changes in the fair value of available for sale financial assets. Amounts
are recognised in the profit or loss when the associated assets are sold or impaired.
The Foreign currency translation reserve is used to record foreign exchange differences arising from the translation of the
financial statements of subsidiaries with functional currencies other than Australian dollars.
The Profit distribution reserve represents an amount allocated from retained earnings that is preserved for future
dividend payments.
The Hedging reserve is used to capture the effective portion of the mark to market movement of instruments designated
in a hedge relationship.
Share based payments reserve
Available-for-sale reserve
Foreign currency translation reserve
Profit distribution reserve
Hedging reserve
Total reserves
CONSOLIDATED
2018
$million
2017
$million
30.6
–
17.4
172.4
(10.1)
210.3
29.1
14.9
15.8
172.4
–
232.2
20. Dividends
A provision is recognised for dividends when they have been announced, determined or publicly recommended by the
directors on or before the reporting date.
Final dividend of 1.0 cent (2017: 0.5 cents)
Interim dividend of 1.0 cent (2017: 1.0 cent)
Total dividends paid or payable
Franking credits available in subsequent financial years based
on a tax rate of 30% (2017 – 30%)
CONSOLIDATED
2018
$million
2017
$million
18.7
22.8
41.5
47.5
9.3
18.7
28.0
51.6
Annual Report 2018 107
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 21. Subsidiaries
Name of Company
Beach Energy Limited 1,2
Beach Petroleum (NZ) Pty Ltd
Beach Oil and Gas Pty Ltd
Beach Production Services Pty Ltd
Beach Petroleum (Cooper Basin) Pty Ltd
Beach Petroleum (CEE) s.r.l
Beach (Tanzania) Pty Ltd
Beach Petroleum (Tanzania) Limited
Beach (USA) Inc 3
Beach Petroleum (NT) Pty Ltd
Territory Oil & Gas Pty Ltd
Adelaide Energy Pty Ltd
Australian Unconventional Gas Pty Ltd
Deka Resources Pty Ltd
Well Traced Pty Ltd
Australian Petroleum Investments Pty Ltd 1,2
Delhi Holdings Pty Ltd
Delhi Petroleum Pty Ltd 1,2
Impress Energy Pty Ltd 1,2
Impress (Cooper Basin) Pty Ltd 1,2
Springfield Oil and Gas Pty Ltd 1,2
Mazeley Ltd
Mawson Petroleum Pty Ltd
Claremont Petroleum (PNG) Ltd
Drillsearch Energy Pty Ltd 1,2
Circumpacific Energy (Australia) Pty Ltd
Drillsearch Gas Pty Ltd
Drillsearch (Field Ops) Pty Ltd
Drillsearch (Finance) Pty Ltd 4
Drillsearch Energy (PNG) Ltd
Kun Yick International Ltd 4
Drillsearch (513) Pty Ltd
Drillsearch (Central) Pty Ltd
Ambassador Oil & Gas Pty Ltd
Ambassador (US) Oil & Gas LLC
Ambassador Exploration Pty Ltd
Acer Energy Pty Ltd
Great Artesian Oil & Gas Pty Ltd 1,2
Lattice Energy Limited 2
Lattice Energy Resources (Perth Basin) Pty Ltd 2
Lattice Energy Resources (Bonaparte) Pty Ltd
Lattice Energy Resources (Bass Gas) Limited
Lattice Energy Services Pty Ltd
Lattice Energy Finance Pty Ltd
Beach Energy Resources NZ (Holdings) Limited 5
Beach Energy Resources NZ (Kupe) Limited 6
Beach Energy (Kupe) Limited 7
Kupe Mining (No.1) Limited
Beach Energy Resources NZ (Tawn) Limited 8
Lattice Energy Resources (Otway) Limited 9
Place of incorporation
South Australia
South Australia
New South Wales
South Australia
Victoria
Romania
Victoria
Tanzania
USA
Victoria
Northern Territory
South Australia
South Australia
South Australia
South Australia
Victoria
Victoria
South Australia
Western Australia
Victoria
Western Australia
Liberia
Queensland
Papua New Guinea
Victoria
New South Wales
Queensland
New South Wales
Victoria
Papua New Guinea
Hong Kong
New South Wales
Victoria
Victoria
USA
Victoria
Queensland
New South Wales
South Australia
Australian Capital Territory
South Australia
UK
Victoria
Victoria
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
UK
PERCENTAGE OF
SHARES HELD
%
2018
%
2017
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
–
–
–
–
All shares held are ordinary shares, other than Mazeley Ltd which is held by a bearer share.
1. Company in Closed Group in FY17 (refer Note 22).
2. Company in Closed Group in FY18 (refer Note 22).
3. Voluntary dissolution of Beach USA Inc. authorized on 11 February 2016, to be finalized 11 February 2019.
4. Company liquidated and deregistered/dissolved during FY18.
5. Changed from Lattice Energy Resources NZ (Holdings) Ltd on 21 March 2018.
6. Changed from Lattice Energy Resources NZ (Kupe) Ltd on 21 March 2018.
7. Changed from Kupe Development Ltd on 21 March 2018.
8. Changed from Lattice Energy Resources NZ (Tawn) Ltd on 21 March 2018.
9. Changed from Toyota Tsusho Gas E&P Otway Ltd on 26 June 2018.
108 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
22. Deed of cross guarantee
Pursuant to ASIC (wholly-owned companies) Instrument 2016/785, certain wholly-owned subsidiaries can be relieved
from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports.
As a condition of the Class Order, Beach and each of the subsidiaries that opted for relief during the year (the Closed
Group) entered into a Deed of Cross Guarantee (Deed). The effect of the Deed is that Beach has guaranteed to pay any
deficiency in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. The
Subsidiaries have also given a similar guarantee in the event that Beach is wound up. Those companies in the Closed Group
for each year are referred to in Note 21.
The consolidated statement of profit or loss and other comprehensive income, summary of movements in retained
earnings/(accumulated losses) and statement of financial position of the Closed Group are as follows:
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Sales revenue
Cost of sales
Gross profit
Other revenue
Other income
Other expenses 1
Operating profit before financing costs
Interest income
Finance expenses
Profit before income tax expense
Income tax benefit/(expense)
Profit after tax for the year
Other comprehensive income/(loss)
Net change in fair value of available for sale financial assets
Net change in hedging reserves
Tax effect relating to components of Other Comprehensive Income
Other comprehensive income/(loss) net of tax
Total comprehensive income/(loss) after tax
Summary of movements in the Closed Group’s retained earnings/(accumulated losses)
Accumulated losses at beginning of the year
Net profit for the year 1
Change in Closed Group entities
Dividends paid to shareholders
Accumulated losses at end of the year
1.
Includes adjustment to 2017 impairment reversal of $1.8 million.
CLOSED GROUP
2018
$million
2017
$million
1,147.3
(714.4)
432.9
13.6
22.3
(375.0)
93.8
6.6
(40.7)
59.7
(19.4)
40.3
(17.2)
(14.4)
6.6
(25.0)
15.3
(261.7)
40.3
–
(41.5)
(262.9)
639.6
(460.5)
179.1
25.0
–
69.7
273.8
6.8
(20.2)
260.4
81.3
341.7
13.8
–
(2.2)
11.6
353.3
(1,156.8)
341.7
572.1
(18.7)
(261.7)
Annual Report 2018 109
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 22. Deed of cross guarantee continued
Consolidated Statement of Financial Position
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Other
Assets held for sale
Total current assets
Non-current assets
Receivables
Available-for-sale financial assets
Other property, plant and equipment
Petroleum assets 1
Exploration and evaluation assets
Goodwill
Deferred tax assets
Derivative financial instruments
Other financial assets
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Current tax liability
Derivative financial instruments
Liabilities held for sale
Total current liabilities
Non-current liabilities
Payables
Provisions
Interest bearing liabilities
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
1.
Includes adjustment to 2017 impairment reversal of $1.8 million.
110 Beach Energy Limited | ABN 20 007 617 969
CLOSED GROUP
2018
$million
2017
$million
193.5
265.5
90.4
19.0
6.4
21.2
596.0
–
–
5.5
2,426.2
357.3
37.2
110.4
–
372.1
3,308.7
3,904.7
263.4
20.9
62.3
47.0
–
393.6
152.5
643.8
925.7
–
1,722.0
2,115.6
1,789.1
347.5
125.0
49.6
0.6
5.5
1.6
529.8
59.2
44.4
413.0
555.6
187.7
–
84.4
0.2
109.5
1,454.0
1,983.8
70.0
41.6
10.1
0.6
0.4
122.7
–
199.3
148.0
0.5
347.8
470.5
1,513.3
1,859.1
192.9
(262.9)
1,789.1
1,558.5
216.5
(261.7)
1,513.3
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 23. Parent entity financial information
Selected financial information of the parent entity, Beach Energy Limited, is set out below:
Financial performance
Net (loss)/profit after tax
Other comprehensive (loss)/income, net of tax
Total comprehensive (loss)/income after tax
Total current assets
Total assets
Total current liabilities
Total liabilities
Issued capital
Share based payments reserve
Available-for-sale reserve
Profits distribution reserve
Hedging reserve
Retained earnings
Total equity
PARENT
2018
$million
(38.2)
(14.9)
(53.1)
154.1
2,344.4
201.1
1,168.3
1,859.1
30.6
–
172.4
(10.1)
(875.9)
1,176.1
2017
$million
207.4
11.5
218.9
528.6
1,223.7
67.2
245.0
1,558.5
29.1
14.8
172.4
0.0
(796.1)
978.7
Expenditure Commitments
The Company’s contracted expenditure at the end of the reporting period for which no amounts have been provided for
in the financial statements.
Capital expenditure commitments
Minimum exploration commitments
Operating commitments
0.4
14.2
0.2
1.5
29.1
0.1
Contingent liabilities and guarantees
Details of contingent liabilities for the Company in respect of service agreements, bank guarantees and parent company
guarantees are disclosed in Note 27.
Beach Energy Limited and a number of its wholly owned subsidiaries are parties to a Deed of Cross Guarantee as
disclosed in Note 22. The effect of the Deed is that Beach Energy Limited has guaranteed to pay any deficiency in the
event of winding up of any of the listed subsidiary companies under certain provisions of the Corporations Act 2001.
Parent entity financial information has been prepared using the same accounting policies as the consolidated financial
statements. Investments in controlled entities are included in other financial assets and are initially recorded in the financial
statements at cost. These investments may have subsequently been written down to their recoverable amount determined
by reference to the net assets of the controlled entities at the end of the reporting period where this is less than cost.
Annual Report 2018 111
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 24. Related party disclosures
Transactions with related parties are on normal commercial terms and conditions no more favourable than those available
to other parties unless otherwise stated.
Remuneration for Key Management Personnel
Short term benefits
Share based payments
Other long term benefits
Total
Subsidiaries
Interests in subsidiaries are set out in Note 21.
CONSOLIDATED
2018
$
2017
$
7,020,807
1,778,536
(28,649)
7,323,732
658,164
140,481
8,770,694
8,122,377
Transactions with other related parties
During the financial year ended 30 June 2018, Beach used the legal services of DMAW Lawyers, a legal firm of which the
Chairman, Mr Davis is a principal. Beach paid $48,231 during the financial year (FY17: $64,742) to DMAW lawyers for legal
services. Directors fees payable to Mr Davis for the year ended 30 June 2018 of $275,000 (FY17: $250,000) were also paid
directly to DMAW Lawyers.
During the current financial year Beach paid $16,500 (FY17: $33,000) to Energy Insights (a company owned by Mr Rayner,
a former Beach executive) for office rental in Brisbane.
During the current financial year Beach paid USD $1,973,472 to Central Petroleum Mereenie Pty Ltd, an entity of which
director, Peter Moore is also a director, for the purchase of crude oil on commercial terms. Beach also paid $227,905 to
Coates Hire Operations Pty Ltd, an entity of which Ryan Stokes is also a director, for the hire of equipment on arms length
commercial terms.
Entities controlled by Seven Group Holdings Limited (SGH) agreed to sub-underwrite the institutional and retail tranches
of Beach’s 3 for 14 Entitlement Offer in September 2017 for up to 68,260,311 New Shares (“Sub-Underwriting Cap”).
SGH received an arm’s length fee for its sub-underwriting commitment which is materially the same as paid by the
Underwriters to other institutional sub-underwriters
25. Disposal group held for sale
The head office building was shown as held for sale at 30 June 2018 with its carrying value impaired by $1.2 million down to
the sale price less costs to sell of $21.2 million. The sale completed on 12 July 2018. Beach also entered into a sale agreement in
FY18 for exploration permit EP 126 in the Bonaparte basin. This transaction is expected to be completed in FY19.
In July 2017 Beach entered into a sale agreement in relation to certain Queensland gas permits (PL184 and ATP932). During
the prior year the carrying value of these permits was impaired down to the expected sale price less costs to sell and
reclassified as an asset held for sale. The sale was completed during FY18.
Assets and liabilities of disposal groups held for sale
BONAPARTE
QUEENSLAND GAS
CORPORATE
TOTAL
Jun 2018
$million
Jun 2017
$million
Jun 2018
$million
Jun 2017
$million
Jun 2018
$million
Jun 2017
$million
Jun 2018
$million
Jun 2017
$million
Property, plant and equipment
Exploration
Assets held for sale
Provisions
Liabilities held for sale
–
–
–
2.6
2.6
–
–
–
–
–
–
–
–
–
–
–
1.7
1.7
0.4
0.4
21.2
–
21.2
–
–
–
–
–
–
–
21.2
–
21.2
2.6
2.6
–
1.7
1.7
0.4
0.4
112 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 In the previous financial year, Beach completed the sale of Beach Petroleum (Egypt) Pty Ltd (Beach Egypt), whose
core asset was a 22% interest in the Abu Sennan Concession, to Rockhopper. Beach received cash consideration of
US$20.5 million and also received a post completion adjustment of US$6.7m.
The disposal had the following effect on the consolidated entity:
Profit on sale
Cash consideration
Receivables
Post completion adjustment
Total consideration received
Less assets and liabilities disposed
Assets held for sale
Liabilities held for sale
Net assets disposed
Release of cumulative gain on historic translation of Beach Egypt included in OCI
Transaction costs and other adjustments
Profit on sale
Cash flow on disposal
Net cash disposed with the subsidiary
Cash consideration (excluding deposit received in prior year)
Post completion adjustment
Cash received from outstanding receivable on sale
Cash outflows paid prior to sale
Net cash flow on disposal
2017
$million
15.6
9.8
8.9
34.3
(39.4)
0.8
(38.6)
53.7
(2.5)
46.9
–
14.0
8.9
1.6
(1.6)
22.9
26. Business combination
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments issued or liabilities
incurred or assumed at the date of exchange. Where equity instruments are issued in an acquisition, the fair value
of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be
demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other
evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of
equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the
extent of any non-controlling interest. Transaction costs incurred in relation to the business combination are expensed as
incurred to the Statement of Profit or Loss. The excess of the cost of acquisition over the fair value of the consolidated
entity’s share of the identifiable net assets acquired is recorded as goodwill.
During the financial year, Beach acquired the Lattice Energy Group, Benaris’ interest in the Otway Gas Project and
Toyota Tsusho corporations interest in the Otway Gas Project and the BassGas project. Beach acquired these interests
for $1,532 million in consideration with an effective accounting acquisition date of 1 January 2018. Lattice was Origin’s
conventional upstream oil and gas business that has interests in the offshore Victorian (OGP and BassGas), onshore
Cooper Basin (SACB JV and SWQ JVs), onshore Perth Basin (Waitsia development project and Beharra Springs) and
offshore New Zealand (Kupe) operations, as well as exploration exposure in the Bonaparte (offshore Western Australia)
and Canterbury basin (New Zealand). Lattice also has ownership interests in a number oil and gas processing facilities,
transportation flowlines and trunklines that deliver product to the Australian East Coast, West Coast and New Zealand gas
markets. The Lattice acquisition included the acquisition of Benaris’ 27.77% interest in OGP for which Origin had entered
into a binding purchase agreement and the Toyota Tsusho transaction increased Beach’s ownership in OGP to 100% and
BassGas Project to 53.75%.
Annual Report 2018 113
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 26. Business combination continued
These acquisitions have transformed Beach from a Cooper Basin oil and gas producer and explorer to a multi-basin producer
and explorer with significant development potential and had the following effect on the consolidated entity:
Purchase consideration
Fair value of net assets acquired
Goodwill on acquisition
Fair Value of assets acquired
Assets and liabilities held at acquisition date:
– Cash
– Receivables
– Inventory
– other current assets
– Petroleum assets
– Exploration and evaluation assets
– Current payables
– Current provisions
– Non current payables
– Restoration liabilities
– Deferred tax liabilities
– Other non-current provisions
Net assets
Cash consideration
Less cash acquired on acquisition
Net cashflow on acquisition
$million
1,532.0
1,448.1
83.9
79.0
93.8
57.7
4.8
1,594.5
436.3
(163.6)
(17.6)
(46.6)
(501.1)
(83.8)
(5.3)
1,448.1
(1,532.0)
79.0
(1,453.0)
The Statement of Profit or Loss includes acquisition and integration costs incurred during the period of $50.1 million for both
acquisitions. In the full year to 30 June 2018, Lattice and Toyota Tsusho interests acquired contributed $457 million to group
revenues and $119 million profit to the consolidated profit before tax. Had the acquisition occurred on 1 July 2017 the Lattice
and Toyota Tsusho interests acquired would have contributed $880 million to group revenues and $233 million profit to the
consolidated profit before tax.
Goodwill arising from the acquisition has been recognised as the excess of the consideration paid above the fair value of the
assets acquired and liabilities assumed as a part of the business combination. The goodwill is attributable to the deferred tax
liability recognised on the acquisition. None of the goodwill recognised is expected to be deductible for tax purposes.
Due to the size and complexity of this acquisition, the acquisition accounting is not yet complete and accordingly the
assets acquired and liabilities assumed are measured on a provisional basis. If new information obtained within twelve
months from the acquisition date about facts and circumstances that existed at the acquisition date identifies adjustments
to the above amounts, or any additional provisions that existed at the acquisition date, then the accounting for the
acquisition will be revised.
114 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 OTHER INFORMATION
Additional information required to be disclosed under Australian Accounting Standards.
27. Contingent liabilities
The directors are of the opinion that the recognition of a provision is not required in respect of the following matters,
as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of
reliable measurement.
Service agreements
Service agreements exist with other executive officers under which termination benefits may, in appropriate
circumstances, become payable. The maximum contingent liability at 30 June 2018 under the service agreements for the
other executive officers is $1,761,500 (2017: $2,360,437).
Bank guarantees
As at 30 June 2018, Beach has provided $52.5 million of bank guarantees or letters of credit as security predominantly
for our environmental obligations and work programs.
Beach has been provided with a $75 million letter of credit facility, of which $48.3 million had been utilised by way of
bank guarantees (refer Note 15 for further details on the corporate debt facility) with the remaining $4.2 million of bank
guarantees being provided by an unsecured facility.
Joint Venture Operations
In the ordinary course of business, the Group participates in a number of joint ventures which is a common form of
business arrangement designed to share risk and other costs. Failure of the Group’s joint venture partners to meet
financial and other obligations may have an adverse financial impact on the Group.
Tax obligations
In the ordinary course of business, the Group is subject to audits from government revenue authorities which could result
in an amendment to historical tax positions.
Parent Company Guarantees
Beach has provided parent company guarantees in respect of performance obligations for certain exploration interests.
Annual Report 2018 115
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION 28. Remuneration of auditors
Audit services
Amounts received or due and receivable by Ernst & Young for:
– auditing or reviewing the financial statements of the group
– auditing the financial statements for subsidiaries
– auditing of joint operation financial statements and royalty returns
Amounts received or due and receivable by KPMG and other firms for:
– auditing or reviewing the financial statements of the group
– auditing of joint operation financial statements and royalty returns
– auditing the financial statements for subsidiaries
Total audit services
Other services
Amounts received or due and receivable by KPMG for:
– tax services Australia
– tax and other services for overseas subsidiaries
Amounts received or due and receivable by Ernst & Young for:
– transaction services for Lattice acquisition before their appointment as auditor
– transaction services for Lattice acquisition after their appointment as auditor
– other services before their appointment as auditor
Total other services
CONSOLIDATED
2018
$000
2017
$000
768
115
62
945
100
59
23
1,127
–
–
1,360
115
51
1,526
–
–
–
–
488
62
127
677
22
88
–
–
–
110
29. Subsequent events
There has not arisen in the interval between 30 June 2018 and up to the date of this report, any item, transaction or event
of a material and unusual nature likely, in the opinion of the directors, to affect substantially the operations of the Group,
the results of those operations or the state of affairs of the Group in subsequent financial years, unless otherwise noted
in the financial report.
116 Beach Energy Limited | ABN 20 007 617 969
NOTES TO THE FINANCIAL STATEMENTSNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
INDEPENDENT
AUDITOR’S REPORT
Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
Independent Auditor's Report to the Members of Beach Energy Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Beach Energy Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2018, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, notes to the financial statements, including a summary of significant accounting policies,
and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2018 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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Annual Report 2018 117
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
INDEPENDENT AUDITOR’S REPORT
1. Acquisition of Lattice Energy Limited
Why significant
How our audit addressed the key audit matter
On 1 January 2018 the Group completed the
acquisition of Lattice Energy Limited (“Lattice”)
and Toyota Tsusho (“Toyota”) interest in the
Otway Gas Project and BassGas project. As
disclosed in Note 26 of the financial report, the
Group acquired total assets of $2,266 million,
assumed total liabilities of $818 million and
recognised total goodwill of $84 million.
As at 30 June 2018, as out lined in Note 26, the
acquisition accounting balances remains
provisional as permitted under Australian
Accounting Standards.
The accounting for the acquisition was
considered a key audit matter due to the
magnitude of the assets acquired and
consideration paid and the judgement required
by the Group to measure the fair values of the
following assets acquired and liabilities assumed:
Our audit procedures included the following:
•
•
•
•
Considered the accounting acquisition date
applied with reference to achievement of control
over the acquired business interests.
Evaluated the Group’s determination of the
purchase consideration paid with reference to
the underlying share sale agreements and cash
consideration paid.
Evaluated the qualifications, competence and
objectivity of external experts used by the Group
to determine the fair value of Property Plant and
Equipment, Petroleum Assets and Restoration
Liabilities.
Assessed the fair value of petroleum assets,
property, plant and equipment assets and
exploration and evaluation assets, with the
assistance of our valuation specialists, including:
•
•
•
•
•
•
•
Property, plant and equipment;
Petroleum assets;
Exploration and evaluation Assets;
Restoration liabilities;
Contingent liabilities and commitments;
Deferred tax assets and liabilities;
Stamp duty liabilities; and
• Working capital balances.
•
•
•
•
•
Considered whether the modelling
methodology applied was in accordance
with the requirements of Australian
Accounting Standards;
Assessed the property plant and
equipment valuations for surface assets
in accordance with a replacement cost
methodology appropriate to the industry;
Performed valuation cross checks on the
acquired exploration and evaluation
assets with reference to resource
multiples;
Assessed the assumptions used by
comparing key assumptions such as oil
and gas prices, discount rates, inflation
rates, and foreign exchange rates to gas
sales agreements and external market
data, and performed sensitivity analysis
using a range of assumptions;
Assessed the operating cost forecasts
and capital expenditure forecasts against
costs incurred to date and trend analysis.
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118 Beach Energy Limited | ABN 20 007 617 969
Why significant
How our audit addressed the key audit matter
•
Assessed restoration provision fair values, with
the assistance of our restoration specialists, as
follows:
•
•
•
•
Examined third party restoration cost
estimates;
Assessed the cost estimate
methodologies adopted and contingency
rates included;
Assessed legislative regulatory
requirements;
Assessed the discount rate applied with
reference to long term bond rates.
•
•
•
Involved our taxation specialists in the
assessment of the fair value calculations as
follows:
•
•
Considered the calculation of stamp duty
payable on acquisition;
Considered the accounting for the tax
effects on the acquisition accounting.
Assessed the identification and measurement of
acquired contingent liabilities and onerous
contracts.
Agreed the working capital balances acquired,
and corresponding fair value adjustments, to
bank statements, invoices, operator statements
and information provided by the vendor.
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Annual Report 2018 119
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
INDEPENDENT AUDITOR’S REPORT
2. Carrying value of petroleum assets
Why significant
How our audit addressed the key audit matter
At 30 June 2018 the Group had oil and gas
petroleum assets of $2,710 million.
Australian Accounting Standards require the
Group to assess throughout the reporting period
whether there is any indication that an asset may
be impaired. If any indication exists, the Group
must estimate the recoverable amount of the
asset. At year end, the Group has concluded,
based on this assessment, that there were no
indicators of impairment or reversal of previous
impairment for any of its Cash Generating Units
(CGUs). As a result no impairment or reversal of
impairment was recognised during the year.
The assessment of indicators of impairment and
reversal of impairment is complex and highly
judgmental, and includes modelling a range of
assumptions and estimates that are affected by
expected future performance and market
conditions. Accordingly, this matter was
considered to be a key audit matter.
Key assumptions, judgements and estimates
used in the Group’s assessment of impairment
and reversal of impairment of non-current assets
are set out in the financial report in notes 9 and
12.
Our audit procedures included the following:
•
•
•
•
•
Evaluated the assumptions, methodologies and
conclusions used by the Group in assessing for
indicators of impairment, in particular, those
relating to the determination of CGUs, forecast
cash flows and inputs used to formulate them.
This included assessing, in conjunction with our
valuation specialists, the discount rates, foreign
exchange rates and commodity prices with
reference to market prices (where available),
market research, market practice, market
indices, broker consensus and historical
performance.
Used the work of the Group’s internal and
external experts with respect to the hydrocarbon
reserve assumptions used in the cash flow
forecasts. This included understanding the
reserve estimation processes carried out, and
assessing the qualifications, competence and
objectivity of the Group’s experts, the scope and
appropriateness of their work.
Analysed cost assumptions against historical
performance and the latest approved budgets
and forecasts.
Considered the Group’s market capitalisation.
Considered the carrying value of producing
assets against recent comparable market
transactions and the market value of comparable
companies, where available.
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120 Beach Energy Limited | ABN 20 007 617 969
3.
Impairment assessment of capitalised exploration and evaluation expenditure
Why significant
How our audit addressed the key audit matter
During the period ended 30 June 2018, the
Group recorded an impairment charge of $87
million in respect of capitalised exploration and
evaluation assets, leaving the Group with
remaining capitalised exploration and evaluation
expenditure of $479 million at 30 June 2018.
The carrying value of exploration and evaluation
assets is impacted by the Group’s ability, and
intention, to continue to explore its areas of
interest. The Group is required to assess whether
any indicators of impairment are present.
Given the magnitude of the impairment charge
and the complex and judgmental nature of
impairment indicator assessments, this was
considered a key audit matter.
Disclosure regarding this matter can be found in
Note 10 of the financial report.
Our audit procedures included the following:
• Assessed the Group’s definition of area of
interest in accordance with Australian
Accounting Standards.
•
•
•
•
Considered the Group’s right to explore in the
relevant exploration area which included
obtaining and assessing supporting
documentation such as license agreements
and correspondence with relevant
government agencies.
Considered the Group’s intention to carry out
significant exploration and evaluation
activities in relevant exploration areas, or
plans to transfer the assets to oil & gas
properties. This included the review of
budgets and enquiries with executive and
operational management.
Inquired of the Group as to their intention
and capacity to continue to explore areas of
interest with capitalised expenditure at 30
June 2018.
For each area of interest impaired, agreed
exploration permit values to the accounting
records of the Group.
• Assessed the Group’s ability to finance any
planned future exploration and evaluation
activity.
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Annual Report 2018 121
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
INDEPENDENT AUDITOR’S REPORT
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2018 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
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122 Beach Energy Limited | ABN 20 007 617 969
•
•
•
•
•
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 60 to 74 of the directors' report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Beach Energy Limited for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
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Annual Report 2018 123
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION
INDEPENDENT AUDITOR’S REPORT
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Anthony Jones
Partner
Adelaide
20 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
124 Beach Energy Limited | ABN 20 007 617 969
Australian Securities Exchange
Ex PEL 91
Contingent resource high estimate1
Delhi
Delhi Petroleum Pty Ltd
GLOSSARY
OF TERMS
A$ or $
Australian dollars
1C
2C
3C
3D
1P
2P
3P
AASB
AGM
AOI
ASX
ATP
BassGas Project
bbl
Bcf
Beach
Contingent resource low estimate 1
Contingent resource best estimate1
Three dimensional
Proved reserve estimate 1
Proved and probable reserve
estimate 1
Proved, probable and possible
reserve estimate1
Australian Accounting Standards
Board
Annual General Meeting
Area of interest
Authority To Prospect (QLD)
Includes the producing Yolla field, the
BassGas pipeline and Lang Lang gas
plant as well as separate retention
leases over the Trefoil, Rockhopper
and White Ibis discoveries
Barrels
Billion cubic feet
Beach Energy Limited and its
subsidiaries
Consists of the Beharra Springs,
Redback Terrace and Tarantula gas
fields and the Beharra Springs gas
processing facilities
Benaris assets or
interests
Refers to 27.77% of OGP, acquired by
Lattice, as announced by Origin on
11 September 2017
boe
Barrels of oil equivalent – the volume
of hydrocarbons expressed in terms of
the volume of oil which would contain
an equivalent volume of energy
Board
Board of Directors of Beach
Bridgeport
Bridgeport (Cooper Basin) Pty Ltd
CAGR
CGU
Compounded annual growth rate
Cash generating unit
Company
Beach and its subsidiaries
Cooper Energy
Cooper Energy Ltd
Cooper Basin
Includes both Cooper and
Eromanga basins
Cooper Basin JV The various joint venture interests
owned by Beach’s wholly owned
subsidiaries Delhi and Lattice in the
SACB JVs and SWQ JVs
Drillsearch
Drillsearch Energy Pty Ltd
DTA
EBITDA
Deferred tax assets
Earnings before interest, tax,
depreciation and amortisation
EIP
Executive Incentive Plan
Entitlement offer $301 million 3 for 14 pro-rata
Ex PEL 104 / 111
PRLs 15, 136 to 150 and various
production licences
EP
EPS
Ex PEL 92
Ex PEL 106
Ex PEL 513
Ex PEL 632
FY(18)
Genesis
Group
GSA
GJ
HBWS
accelerated non-renounceable
entitlement offer
Exploration Permit (NT)
Earnings per share
PRLs 151 to 172 and various
production licences
PRLs 85 to 104 and various
production licences
PRLs 129 and 130 and various
production licences
PRLs 191 and 206 and various
production licences
PRLs 131 to 134 and various
production licences
Operating cash flow less investing
cash flow (excluding acquisitions and
divestitures)
Financial year (2018)
Genesis Energy Limited
Beach and its subsidiaries
Gas sales agreement
Gigajoule
Halladale / Black Watch / Speculant
fields in the offshore Otway Basin in
licenses VIC/L1(v) and VIC/P42(v)
H(1) (FY18)
(First) half year period (of FY18)
IFRS
kbbl
kboe
km
KMP
KPI
International Financial Reporting
Standards
Thousand barrels of oil
Thousand barrels of oil equivalent
Kilometre
Key management personnel
Key performance indicator
Beach Egypt
Beach Petroleum (Egypt) Pty Ltd
Beharra Springs Beach 67% and operator, Mitsui 33%.
Free cash flow
1. Complete definitions for Reserves and Contingent Resources can be sourced from “Guidelines for Application of the Petroleum Resources
Management System” November 2011 – better known as SPE PRMS.
Annual Report 2018 125
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION GLOSSARY OF TERMS
kt
Kupe
Thousand tonnes
Kupe Gas Project. Beach 50% and
operator, Genesis 46%, NZOG 4%.
Consists of offshore Kupe gas field in
the Taranaki Basin, the Kupe offshore
platform, Kupe gas plant and associated
infrastructure
Lattice
Lattice Energy Limited
Liquefied natural gas
Liquefied petroleum gas
Long term incentive
PRMS
PRRT
Petroleum Resources
Management System
Petroleum Resource Rent Tax
Q(1) (FY19)
(First) quarter (FY19)
ROC
Return on capital
Rockhopper
Rockhopper Exploration plc
SACB JVs
South Australian Cooper Basin
Joint Ventures
South Australian
Cooper Basin
Joint Ventures
The Fixed Factor Area (Beach 33.4%,
Santos 66.6%) and the Patchawarra East
Block (Beach 27.68%, Santos 72.32%)
LNG
LPG
LTI
LTIFR
Mitsui
MMbbl
MMboe
MMscf
MMscfd
Lost time injury frequency rate,
calculated as lost time injuries per million
hours worked (Beach employees and
contractors)
Mitsui &Co., Ltd
Million barrels of oil
Million barrels of oil equivalent
Million standard cubic feet of gas
Santos
SAWA
Senex
SGH
SPE
STI
Santos Limited
South Australia Western Australia
reporting segment
Senex Energy Limited
Seven Group Holdings Limited
Society of Petroleum Engineers
Short term incentive
Million standard cubic feet of gas per day
SWQ JVs
South West Queensland Joint Ventures
Net Gearing
The ratio of net debt/(cash) to the sum of
net debt / (cash) and total book equity
NPAT
NZ
NZOG
Origin
OGP
PACE
pcp
PEL
PEP
PL
PPL
PJ
PRL
Net profit after tax
New Zealand
New Zealand Oil & Gas Limited
Origin Energy Ltd
Otway Gas Project. Beach 100% and
operator. Consists of offshore gas fields
Thylacine and Geographe, the Thylacine
Well Head Platform, Otway Gas Plant
and associated infrastructure
The South Australian Plan for
Accelerating Exploration gas
grant scheme
Prior corresponding period
Petroleum Exploration Licence (SA)
Petroleum Exploration Permit
(Victoria and NZ)
Petroleum Lease (QLD)
Petroleum Production Licence (SA)
Petajoule
Petroleum Retention Licence (SA)
South West
Queensland
Joint Ventures
Includes the SWQ Gas Unit and
exploration and oil production
licences – various equity interests
(Beach 30-52.2%)
Tcf
TCFD
TFR
TJ
TJ/d
Trillion cubic feet
Task force on climate-related financial
disclosures
Total fixed remuneration
Terajoule
Terajoules per day
Toyota Tsusho
Toyota Tsusho Corporation and related
parties
Toyota Tsusho
assets or
interests
TRIFR
TSR
US$
Waitsia
Refers to 5% of OGP and 11.25% of the
BassGas Project. Refer Beach’s ASX
release #098/17 of 21 December 2017 for
further information.
Total recordable injury frequency rate
Total shareholder return
United States $
Beach 50%, Mitsui 50% and operator.
The project consists of the Waitsia
Gas Project, an interest in the
Xyris production facility and other
in-field pipelines
126 Beach Energy Limited | ABN 20 007 617 969
SCHEDULE OF
TENEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Subsidiary Company Tenement
%
Subsidiary Company Tenement
%
38.5%
47.5%
45%
52.2%
30%
30%
38.8%
40%
0%
39.9375%
0%
40%
75%
75%
50%
100%
75%
75%
100%
40%
40%
Cooper/Eromanga – Queensland
Maw 6.50%
Delhi 32%
Delhi 22.5%
LEL 25%
Delhi 20%
LEL 25%
Delhi 25.2%
LEL 27%
Delhi
ATP 1189 ex ATP 259
(Naccowlah Block and PLs) 1
ATP 1189 ex ATP 259
(Aquitaine A Block) 2
ATP 1189 ex ATP 259
(Aquitaine B Block) 3
ATP 1189 ex ATP 259
(Aquitaine C Block) 4
ATP 1189 ex ATP 259
(Innamincka Block) 5
ATP 1189 ex ATP 259
(Total 66 Block) 6
ATP 1189 ex ATP 259
(Wareena Block) 7
PL 55 (50/40/10)
PL 184 (Thylungra Gas
Discovery) 8
SWQ Gas Unit 9
Delhi
Delhi 28.8%
LEL 10%
Delhi
BPT 0%
Maw 0%
Delhi 23.2%
LEL 16.7375%
DLS 0%
Circumpacific 0%
Circumpacific
ATP 932 8
ATP 940
Cooper/Eromanga – South Australia
BPT
BPT
BPT
BPT 40%
DLS 30%
GAOG 30%
BPT
PPL 204 (Sellicks Oil Field)
PPL 205 (Christies Oil Field)
PPL 210 (Aldinga Oil Field)
PPL 212 (Kiana Oil Field)
BPT
BPT 50%
GAOG 50%
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
BPT
BPT
BPT
BPT
BPT
BPT
BPT 40%
GAOG 60%
BPT 40%
GAOG 60%
BPT 40%
GAOG 60%
BPT 40%
GAOG 60%
BPT 50%
GAOG 50%
Springfield 15%
Impress (CB) 25%
BPT 40%
GAOG 60%
BPT 40%
GAOG 60%
PPL 220 (Callawonga Oil
Field)
PPL 224 (Parsons Oil Field)
PPL 239 (Middleton/
Brownlow Fields)
PPL 240 (Snatcher Oil Field)
PPL 242 (Growler Oil Field)
PPL 243 (Mustang Oil Field)
40%
PPL 245 (Butlers Oil Field)
PPL 246 (Germein Oil Field)
PPL 247 (Perlubie Oil Field)
PPL 248 (Rincon Oil Field)
PPL 249 (Elliston Oil Field)
PPL 250 (Windmill Oil Field)
PPL 253 (Bauer/Bauer-North/
Chiton/Arno Oil Fields)
PPL 254 (Congony/Kalladeina
Oil Fields)
PPL 255 (Hanson/Snelling Oil
Fields)
PPL 256 (Sceale Oil Field)
PPL 257 (Canunda/
Coolawang Fields)
PPL 258 (Spitfire Oil Field)
75%
75%
75%
75%
75%
75%
100%
100%
100%
100%
100%
40%
PPL 260 (Stunsail Oil Field)
100%
PPL 261 (Pennington Oil
Field)
100%
BPT 40%
GAOG 60%
Springfield 15%
Impress (CB) 25%
BPT 40%
GAOG 60%
BPT
BPT
BPT
BPT
BPT
Acer
Acer
Acer
Acer
Acer
Acer
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
BPT 50%
GAOG 50%
BPT 50%
GAOG 50%
BPT 40%
DLS 20%
GAOG 40%
BPT
Springfield 15%
Impress (CB) 25%
Acer
Acer
BPT
BPT
BPT 23.33%
ADE 10%
Deka 5.03%
Well Traced 5.03%
Springfield 15%
Impress (CB) 25%
DLS (513)
Ambassador
BPT
GAOG
LEL
LEL
Delhi 12.86%
LEL 7.902%
BPT 25%
DLS Gas 30%
GAOG 45%
BPT 25%
DLS Gas 30%
GAOG 45%
Delhi 17.14%
LEL 10.536%
Delhi
Delhi 20.21%
LEL 13.19%
PPL 262 (Balgowan Oil Field)
100%
PEL 87
ex PEL 91 10
GSEL 648 (ex PEL 91)
ex PEL 92 11
GSEL 634 (ex PEL 92)
PEL 94
PEL 95
ex PEL 101 12
GSEL 652 (ex PEL 101) 12
ex PEL 103 13
GSEL 659 (ex PEL 103) 13
ex PEL 103A (Avery Block) 14
GSEL 660 (ex PEL 103A) 14
ex PEL 104 17
PRL 15 (Growler Block)
ex PEL 106 15
GSEL 646 (ex PEL 106)
ex PEL 107 16
GSEL 653 (ex PEL 107)
ex PEL 111 17
PEL 182
ex PEL 182 18
ex PEL 218 (Permian) 19
GSEL 633 (ex PEL 218
Permian)
ex PEL 218 (Post Permian) 20
PEL 424
ex PEL 513 21
PEL 570
PEL 630
ex PEL 632 22
ex PEL 637 23
ex PEL 638 24
Reg Sprigg West Unit
PRL 26 (Udacha Unit)
40%
100%
40%
75%
75%
50%
50%
100%
100%
100%
100%
0%
0%
40%
40%
100%
100%
100%
40%
40%
43%
43%
100%
70%
43.39%
40%
40%
47.5%
50%
40%
0%
0%
20.8%
100%
GSEL 645 (ex Udacha Unit)
100%
Patchawarra East 25
27.676%
Fixed Factor Agreement 26
SA Unit
20.21%
33.4%
Annual Report 2018 127
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION SCHEDULE OF TENEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Subsidiary Company Tenement
%
Subsidiary Company Tenement
Otway (Offshore) – Tasmania
LEL
T/30P
T/L2 (Thylacine) 28
LEL 95%
LEROL 5%
LEL 95%
LEROL 5%
T/L3 (Thylacine South) 28
Bass Basin – Tasmania
LEL 37.5%
LERBGL 5%
BPT 11.25%
T/L1 (Yolla) 31
LEL 39%
BPT 11.25%
LEL 39%
BPT 11.25%
LEL 39%
BPT 11.25%
LEL 39%
BPT 11.25%
TR/L2 32
TR/L3 32
TR/L4 32
TR/L5 32
Carnarvon – Western Australia
BPT
WA-359-P 33
Perth Basin – Western Australia
LERPBPL
EP 320
LERPBPL
LERPBPL
L11 (Beharra Springs)
L1/L2 (Waitsia Excluding
Dongara, Mondarra and
Yardarino)
Bonaparte – Northern Territory
BPT (NT) 55%
TOAG 45%
EP 126
LEL
LEL
LERBPL
NT/P84
NT/P85
NT/RL1
Canterbury – New Zealand
BPT (NZ)
PEP 52717
BERNZHL
PEP 38264
Northern Taranaki Graben – New Zealand
BPT (NZ)
PEP 57080
Taranaki Basin – New Zealand
BERNZKL
Kupe Mining No.1 Ltd
PML 38146 (Kupe)
Otway – South Australia
ADE
PEL 494
ADE
ADE
ADE
ADE
ADE
ADE
ADE
ADE
ADE
GSEL 654
PPL 62 (Katnook)
PPL 168 (Redman)
PPL 202 (Haselgrove)
PRL 1 (Wynn)
PRL 2 (Limestone Ridge)
PRL 13 (Killanoola Field)
PRL 32 (ex PEL 255)
GSRL 27
Arrowie – South Australia
BPT
GEL 156
Otway – Victoria
BPT 10%
LEL 90%
BPT 10%
LEL 90%
PPL 6 (McIntee Gas Field)
PPL 9 (Lavers Gas Field)
LEL
LEL
LEL
LEL
LEL
LEL
LEL
LEL 95%
LEROL 5%
LEL
LEL
Maw
BPT
BPT
PPL 4
PPL 5
PPL 7
PPL 10
PPL 12
Vic/P42(V)
Vic/P43
Vic/L23 27
Vic/P69 28
Vic/L1(V)
PEP 150 29
PEP 168
PEP 171 30
Browse – Western Australia
BPT
WA-281-P
BPT
WA-80-R
Bonaparte Basin – Western Australia
LEL
WA-454-P
LERBPL
LERBPL
NT/RL1 (Petrel)
WA-6-R (West Petrel)
70%
70%
100%
100%
100%
100%
100%
100%
70%
100%
21%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
0%
50%
0%
7.34%
7.34%
100%
5%
5%
128 Beach Energy Limited | ABN 20 007 617 969
%
100%
100%
100%
53.75%
50.25%
50.25%
50.25%
50.25%
21%
67%
67%
50%
100%
50%
50%
5%
50%
65%
50%
50%
1. The Naccowlah Block consists of ATP 1189 ex ATP 259 (Naccowlah) and PLs 23-26, 35, 36, 62, 76-79, 82, 87, 133, 149, 175, 181, 182, 189, 287,
302, 495, 496, PLA 1026. Note sub-leases of PLs (gas) to SWQ Unit.
2. The Aquitaine A Block consists of ATP 1189 ex ATP 259 (Aquitaine A) and PLs 86, 131, 146, 177, 208 and 254. Note sub-leases of part PLs (gas)
to SWQ Unit.
3. The Aquitaine B Block consists of ATP 1189 ex ATP 259 (Aquitaine B) and PLs 59 – 61, 81, 83, 85, 108, 111, 112, 132, 135, 139, 147, 151, 152, 155, 205, 288,
PL 508, 509, 1013, PLA 1014, PLA 1035. Note sub-leases of part of PLs (gas) to SWQ Unit.
4. The Aquitaine C Block consists of ATP 1189 ex ATP 259 (Aquitaine C) and PLs 138 and 154.
5. The Innamincka Block consists of ATP 1189 ex ATP 259 (Innamincka) and PLs 58, 80, 136, 137, 156, 159 and 249. Note sub-leases of part PLs (gas)
to SWQ Unit.
6. The Total 66 Block consists of ATP 1189 ex ATP 259 (Total 66) and PLs 34, 37, 63, 68, 75, 84, 88, 110, 129, 130, 134, 140, 142 – 144, 150, 178, 186, 193,
241, 255, 301, 502 PLA 497 and PLA 513. Note sub-leases of part of PLs (gas) to SWQ Unit.
7. The Wareena Block consists of ATP 1189 ex ATP 259 (Wareena) and PLs 113, 114, 141, 145, 148, 153, 157, 158, 187, 188, 411 and PL 1016. Note sub-leases
of part of PLs (gas) to SWQ Unit.
8. PL 184 and ATP 932 are subject to regulatory approval.
9. The SWQ Gas Unit consists of subleases of PLs within the gas production area of Naccowlah Block, Aquitaine A Block, Aquitaine B Block,
Innamincka Block, Wareena Block and Total 66 Block.
10. ex PEL 91 consists of PRLs 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171 and 172.
11. ex PEL 92 consists of PRLs 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103 and 104.
12. ex PEL 101 consists of PRLs 173 and 174. Registered interest 80%, acquisition of further 20% subject to regulatory approval.
13. ex PEL 103 consists of PRLs 14, 17, 18, 180 and 181.
14. ex PEL 103A consists of PRL 182. Subject to conditions precedent and regulatory approval.
15. ex PEL 106 consists of PRLs 129 and 130.
16. ex PEL 107 consists of PRLs 175, 176, 177, 178 and 179.
17. ex PEL 104/111 consists of PRLs 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149 and 150.
18. ex PEL 182 consists of PRLs 135, 238, 239, 240, 241, 242, 243 and 244.
19. ex PEL 218 (Permian) consists of Permian section of PRLs 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48 and 49.
20. ex PEL 218 (Post Permian) consists of Post Permian section of PRLs 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48 and 49. Registered
interest is 66.67%. Assignment to a third party of 23.28% subject to completion of assignment documentation and regulatory approval.
21. ex PEL 513 consists of PRLs 191 and 206.
22. ex PEL 632 consists of PRLs 131, 132, 133 and 134.
23. ex PEL 637 consists of PRLs 106 and 210 – 220 subject to regulatory approval.
24. ex PEL 638 consists of PRLs 221 – 230 subject to regulatory approval.
25. Patchawarra East consists of PPLs 26, 76, 77, 118, 121 – 123, 125, 131, 136, 147, 152, 156, 158, 167, 182, 187, 194, 201 and 229.
26. The Fixed Factor Agreement consists of PPLs 6 – 20, 22 – 25, 27, 29 – 33, 35 – 48, 51 – 61, 63 – 70, 72 – 75, 78 – 81, 83, 84, 86 – 92, 94, 95, 98 – 111,
113 – 117, 119, 120, 124, 126 – 130, 132 – 135, 137 – 140, 143 – 146, 148 – 151, 153 – 155, 159 – 166, 172, 174 – 180, 189, 190, 193, 195, 196, 228 and 230 – 238.
27. T/L2, T/L3, VIC/L23. Registered interest is 95%, acquisition of a further 5% subject to regulatory approval.
28. VIC/P69 subject to regulatory approval.
29. PEP 150 subject to regulatory approval.
30. PEP 171 subject to regulatory approval.
31. T/L1. Registered interest is 10%, acquisition of a further 11.25% subject to regulatory approval.
32. T/RL2, T/RL3, T/RL4 and T/RL5. Registered interest is 39%, acquisition of a further 11.25% subject to regulatory approval.
33. Farm in to WA-359-P is subject to satisfaction of conditions precedent and regulatory approval. Beach also has an option to farmin to a 7.5%
interest in adjoining permit (WA-409-P), the exercise of which is also subject to the satisfaction of conditions precedent and regulatory approval.
Annual Report 2018 129
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION SCHEDULE OF TENEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Subsidiary Company
Acer
Ambassador
ADE
AUG
BPT (NT)
BPT (NZ)
BPT
Acer Energy Pty Ltd
Ambassador Exploration Pty Ltd
Adelaide Energy Pty Ltd
Australian Unconventional Gas Pty Ltd
Beach Petroleum (NT) Pty Ltd
Beach Petroleum (NZ) Pty Ltd
Beach Energy Limited
Circumpacific
Circumpacific Energy (Australia) Pty Ltd
Deka
Delhi
DLS (513)
DLS
DLS Gas
GAOG
Impress (CB)
LEL
LERBPL
LEROL
LERPBPL
BERNZKL
BERNZHL
LERBGL
Maw
Springfield
TOAG
Well Traced
Deka Resources Pty Ltd
Delhi Petroleum Pty Ltd
Drillsearch (513) Pty Ltd
Drillsearch Energy Ltd
Drillsearch Gas Pty Ltd
Great Artesian Oil & Gas Pty Ltd
Impress (Cooper Basin) Pty Ltd
Lattice Energy Limited
Lattice Energy Resources (Bonaparte) Pty Limited
Lattice Energy Resources (Otway) Limited
Lattice Energy Resources (Perth Basin) Pty Limited
Beach Energy Resources NZ (Kupe) Limited
Beach Energy Resources NZ (Holdings) Limited
Lattice Energy Resources (Bass Gas) Limited
Mawson Petroleum Pty Ltd
Springfield Oil and Gas Pty Ltd
Territory Oil and Gas Pty Ltd
Well Traced Pty Ltd
Tenements Acquired
WA-80-R, WA-359-P, PRLs 210 – 220, PRL 106, PRLs 221 – 230, PPL, 6, PPL 9, PPL 4, PPL 5, PPL 7,PPL 10, PPL 12, Vic/P42(V),
Vic/P43, Vic/L23, Vic/P69, Vic/L1(V), T/30P, T/L2, T/L3, T/L1, TRL2 – 5, EP 320, L11, L1, L2, WA-454-P, NT/RL1, WA-6-R, NT/
P84, NT/P85, PML 38146, PEP 38264
Tenements Divested
ATP 539, ATP 549C, ATP 549W, ATP 633, ATP 783, ATP 920, ATP 924, ATP 299, PEP 150, PEP 171, PEL 103, GSEL 659 (ex PEL
103), ex PEL 103A (Avery Block), GSEL 660 (ex PEL 103A), ex PEL 637, ex PEL 638, VIC/P69
130 Beach Energy Limited | ABN 20 007 617 969
SHAREHOLDER
INFORMATION
Share details – Distribution as at 1 October 2018
Range of shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
Shareholders with non-marketable parcels
Number of shareholders
Fully paid ordinary shares
5,230
8,046
4,031
6,494
541
24,342
2,019
Voting rights – fully paid ordinary shares
On a show of hands, every person qualified to vote, whether as a member or proxy or attorney or representative, shall
have one vote. Upon a poll, every member shall have one vote for each share held.
Substantial shareholders as disclosed by notices received by Beach as at 1 October 2018
Name
Number of voting
shares held
Date of notice
Seven Group Holdings Limited and others
582,554,052
25 October 2017
Australian Capital Equity Pty Ltd, Wroxby Pty Ltd, North Aston Pty Ltd and others
(ACE Group); Ashblue Holdings Pty Ltd, Tiberius (Seven Investments) Pty Ltd,
Tiberius Pty Ltd and others (Tiberius Group Entities); Mr Kerry Matthew Stokes AC
and Kemast Investments Pty Ltd
Dimensional Fund Advisors LP and others
582,554,052
25 October 2017
134,559,639
12 October 2017
Twenty largest shareholders as at 1 October 2018
Rank
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NETWORK INVESTMENT HOLDINGS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
NETWORK INVESTMENT HOLDINGS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
NETWORK INVESTMENT HOLDINGS PTY LTD
NETWORK INVESTMENT HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
AMP LIFE LIMITED
MR ROBERT LEE PETERSEN
BRISPOT NOMINEES PTY LTD
CS THIRD NOMINEES PTY LIMITED
AYERSLAND PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
20.
BNP PARIBAS NOMS PTY LTD
Top 20 holders of fully paid ordinary shares
Remaining Holders Balance
Total
Fully paid
ordinary shares
492,535,507
488,667,776
335,298,609
252,834,339
106,355,246
34,127,698
32,890,979
26,843,311
19,810,727
18,929,471
18,742,950
14,172,317
13,203,761
7,908,033
6,038,276
5,192,282
4,664,610
4,595,110
4,313,158
4,267,518
1,891,391,678
385,638,799
2,277,030,477
% of Units
21.63
21.46
14.73
11.10
4.67
1.50
1.44
1.18
0.87
0.83
0.82
0.62
0.58
0.35
0.27
0.23
0.20
0.20
0.19
0.19
83.06
16.94
100
Annual Report 2018 131
OVERVIEWFULL YEAR REPORTADDITIONAL INFORMATION CORPORATE
INFORMATION
Annual meeting
The annual meeting will be held as follows:
Place
Date
Time
Adelaide Convention Centre
North Tce, Adelaide SA 5000
Friday 23 November 2018
10.30 am
CORPORATE
DIRECTORY
Chairman
Glenn Stuart Davis
LLB, BEc, FAICD
Independent non-executive
Deputy Chairman
Colin David Beckett
FIEA, MICE, GAICD
Independent non-executive
Directors
Philip James Bainbridge
BSc (Hons) (Mechanical Engineering), MAICD
Independent non-executive
Joycelyn Cheryl Morton
BEc, FCA, FCPA, FIPA, FCIS, FAICD
Independent non-executive
James David McKerlie
BEc, Dip Fin Mgt, FCA FAICD
Independent non-executive
Peter Stanley Moore
PhD, BSc (Hons), MBA, GAICD
Independent non-executive
Richard Joseph Richards
BComs/Law (Hons), LLM, MAppFin
Non-executive
Ryan Kerry Stokes
BComm, FAIM
Non-executive
Company Secretary
Peter Kupniewski
LL.B/LP
132 Beach Energy Limited | ABN 20 007 617 969
Registered Office
25 Conyngham Street
Glenside SA 5065
(08) 8338 2833
Telephone:
(08) 8338 2336
Facsimile:
Email: info@beachenergy.com.au
Share Registry – South Australia
Computershare Investor Services Pty Ltd
Level 5, 115 Grenfell St
Adelaide SA 5000
Telephone:
Facsimile:
(08) 8236 2300
(08) 8236 2305
Auditors
Ernst & Young
Level 12/121 King William Street
Adelaide SA 5000
Securities Exchange Listing
Beach Energy Limited shares are listed on the ASX Limited
(ASX Code: BPT)
Beach Energy Limited
ABN 20 007 617 969
Website
www.beachenergy.com.au
The 2018 Corporate Governance Statement
can be viewed on our website at: Sustainability
at Beach/Corporate Governance
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www.beachenergy.com.au
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