ANNUAL REPORT 2019
Beach Energy Limited
ABN 20 007 617 969
PRODUCTION
MMBOE
55%
29.4
10.6 19.0
9.1
9.7
FY15
FY16
FY17
FY18 FY19
Kupe processing station and
Mount Taranaki, New Zealand
Kupe well head platform
in the Taranaki Basin,
New Zealand
Australia’s
premier
multi-basin
upstream oil
company
OUR
SAFEST
YEAR ON
RECORD
Approximately
seventy per cent
of production is
operated
70%
Record Beach
production of
29.4MMboe
Approximately
seventy per cent
of production is
operated
70%
Beach Energy Limited
ABN 20 007 617 969
19 AUGUST 2019
BEACHENERGY.COM.AU
Victorian Otway Basin
Visualised as
an energy burst
of droplets, the
new Beach Energy
logo creates the
shape of an
ammonite shell
— a tribute to Beach’s founder
and respected geologist
Dr Reg Sprigg.
06
for more information on our new brand
P Beach Energy Limited
ABN 20 007 617 969
19 AUGUST 2019
BEACHENERGY.COM.AU
Executing our strategy,
delivering on promises
and driving best-in-class
returns
ABOUT THIS REPORT
This 2019 Annual Report is a summary of Beach’s
operations and activities for the 12-month period ended
30 June 2019 and financial position as at 30 June 2019.
In this report, unless otherwise stated, references to
‘Beach’ and the ‘Group’, the ‘company’, ‘we’, ‘us’ and ‘our’
refer to Beach Energy Limited and its subsidiaries. See
Glossary for further defined terms used in this report.
This report contains forward-looking statements.
Please refer to page 50, which contains a notice in
respect of these statements.
All references to dollars, cents or $ in this document are
to Australian currency, unless otherwise stated. Due to
rounding, figures and ratios in tables and charts throughout
this report may not reconcile to totals.
An electronic version of this report is available on
Beach’s website, www.beachenergy.com.au
The 2019 Corporate Governance Statement can be viewed
on our website on the Corporate Governance page.
ANNUAL REPORT 2019 01
IN THIS REPORT
About this report
About Beach Energy
Chairman’s letter
Managing Director’s letter
Executive team
Our strategy
Operating review
Reserves statement
Sustainability
Board of Directors
01
02
08
10
12
14
15
30
36
40
42
Full Year Report
43
Directors’ report
Auditor’s independence declaration
56
2019 Remuneration in brief (unaudited) 57
58
Remuneration report
73
Directors’ declaration
74
Financial statements
78
Notes to the financial statements
116
Independent auditor’s report
Additional Information
Glossary of terms
Schedule of tenements
Shareholder information
Corporate information & directory
123
123
125
130
132
ANNUAL GENERAL
MEETING
Venue:
Adelaide Convention Centre
Address:
North Terrace,
Adelaide SA 5000
Date:
10.30am,
Tuesday, 26 November 2019
PERFORMANCE
HIGHLIGHTS
SALES
VOLUMES
MMboe
55%
31.2
20.1
10.5
10.8 11.8
54%
1,925
1,251
SALES
REVENUE
$ million
728
653
558
2000
0
57%
1,038
663
OPERATING
CASH FLOW
$ million
319
229 233
1200
1000
800
600
400
200
0
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
UNDERLYING
NPAT1
$ million
UNDERLYING
EPS1
cps
86%
560
302
162
91
36
77%
24.6
13.9
7.0
8.5
2.4
25
20
15
10
5
0
RETURN ON
CAPITAL
EMPLOYED3
%
27%
27
19
13
6
3
30
25
20
15
10
5
0
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
35
30
25
20
15
10
5
0
600
500
400
300
200
100
0
ORGANIC 2P RESERVES
REPLACEMENT RATIO2
204%
DEBT REPAID IN FY19
$950m
COOPER BASIN OPERATED
FIELD OPERATING COSTS
<$5/boe
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 46 for a reconciliation of this
information to the financial report.
2 Refer to Reserves Statement for the year ended 30 June 2019 on pages 30 – 35 of this report for additional disclosures.
3 Return on capital employed (ROCE) defined as underlying NPAT divided by the average of opening total equity and closing total equity.
02
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, Beach has operated and
non-operated, onshore and offshore, oil
and gas production in five producing basins
across Australia and New Zealand and is a
key supplier of gas into 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 and appraise 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 supplied approximately 15% of
Australian east coast domestic gas
demand in FY19.
FY19
GROUP
Highlights
Record Beach production of
29.4 MMboe
204% organic 2P reserves
replacement ratio
$60 million synergy target achieved
Achieved portfolio average facility
reliability of 97%
In addition to its producing assets, Beach
has exploration permits in the onshore
and offshore Otway Basin and offshore
Bonaparte, Browse and Carnarvon 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.
ANNUAL REPORT 2019 03
ANNUAL REPORT 2019 03
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
Safety takes precedence in
everything we do
Creativity
We continuously explore
innovative ways to create
value
Respect
We respect each other,
our communities and the
environment
Integrity
We are honest with ourselves
and others
Performance
We strive for excellence and
deliver on our promises
Teamwork
We help and challenge each
other to achieve our goals
Our committed
people and our
values-based
culture are our
foundation for
success
BEACH ENERGY LIMITED
ASSET
HIGHLIGHTS
Perth Basin
Cooper Basin
• Beach and Mitsui E&P Australia
(MEPAU) agreed to align interests 50:50
across all shared Perth Basin assets.
• FID of Waitsia Stage 1 expansion,
supplying new gas contract with
Alinta Energy.
• Waitsia Gas Project Stage 2 progressed
with FEED completed and EPC tenders
in progress.
• 134 wells drilled in FY19 at an overall
success rate of 84%.
• Horizontal drilling technology
successfully applied in Western Flank,
driving record Western Flank oil
production of 5.2 MMboe and adding
7.4 MMbbl of 2P oil reserves.
South Australian
Otway Basin
• Drilling commenced at Haselgrove-4
appraisal well.
• Construction of 10 TJ/d Katnook gas
processing facility commenced.
Victorian
Otway Basin
• Rigs secured to drill near shore, extended
reach drilling wells Black Watch and
Enterprise in FY20.
• Ocean Onyx offshore rig secured to
undertake offshore exploration and
development program.
• O.G. Energy becomes a 40% participant
in the Victorian Otway Basin assets for
consideration of $344 million.
• Acquired La Bella gas field via
government gazettal process for
$4 million.
Bass Basin
• Progressed the evaluation of a potential
tieback of the Trefoil Field, moving to
“concept select” phase.
Taranaki Basin
• FEED completed on Kupe onshore
compression project, designed to extend
the production plateau and field life of the
Kupe gas field.
Canterbury
Basin
• Finalised a farm out and committed to
Stage 3 work programme in PEP38264,
which includes the commitment to drill
one well by October 2021.
Carnarvon Basin • Beach farmed in to exploration permit
WA- 359-P which includes the Ironbark
prospect.
• Secured Ocean Apex rig for proposed
drilling of Ironbark prospect in FY21.
Bonaparte Basin • Executed equity alignment agreement
with Santos across four offshore
exploration permits.
04
BROWSE BASIN
CARNARVON BASIN
PERTH
(Regional Office)
Perth Basin
WAITSIA
(Beach 50%
non-operated)
BEHARRA
SPRINGS
(Beach 67%
operated)
GAS PROCESSING
FACILITIES
GAS PRODUCTION
OIL PRODUCTION
EXPLORATION
Ownership percentages provided are
Beach’s ownership of the producing
assets in the respective regions.
Illustration not to scale.
ABOUT BEACH ENERGY
Beach portfolio
DARWIN
BONAPARTE BASIN
Cooper Basin
WESTERN FLANK &
COOPER BASIN JV
(Various operated and
non-operated interests)
BRISBANE
HEAD OFFICE
ADELAIDE
SYDNEY
CANBERRA
SA OTWAY BASIN
PENOLA
(Regional
Office)
OPERATIONS OFFICE
MELBOURNE
Victorian Otway Basin
OTWAY GAS PROJECT/HBWS
(Beach 60% operated)
Bass Basin
BASSGASS
(Beach 53.75%
operated)
Taranaki Basin
KUPE
(Beach 50% operated)
NEW
PLYMOUTH
(Regional Office)
WELLINGTON
CANTERBURY BASIN
ANNUAL REPORT 2019 05
ANNUAL REPORT 2019 05
BEACH ENERGY LIMITED In June, Beach left its headquarters
of the last 23 years, opening a new
head office in the Adelaide CBD.
Our New
Brand
In March, Beach
undertook a company
rebrand, unveiling
a fresh new look to
coincide with our
expanded operations.
Major sponsor of the
Royal Flying Doctors (SA/NT)
06 06
Haselgrove-4 drilling, Otway
Basin, South Australia
ABOUT BEACH ENERGY
In FY19, Beach launched
a new company website,
showcasing our basin
activities and providing
easily accessible
information for investors,
stakeholders or members
of the community.
beachenergy.com.au
2019 APPEA Conference
The new Beach logo is a
tribute to the company’s
history, with an energy
burst coming together
to create the shape of an
ammonite shell — a tribute
to Beach’s founder and
respected geologist Dr Reg
Sprigg.
ANNUAL REPORT 2019 07
ANNUAL REPORT 2019 07
BEACH ENERGY LIMITED Cooper Basin,
South Australia
Chairman’s
Letter
Kupe,
New Zealand
Dear Shareholder,
Today we report another year of strong
operational and financial performance,
highlighted by an 86% increase in
underlying NPAT to $560 million. We
foreshadowed our expectation of strong
operational and financial performance
from our expanded asset portfolio and this
report reflects that with record levels of
production and excellent financial results
We are in an enviable financial position
as we enter an important year for
reinvestment into our core business.
Our balance sheet is in a net cash position,
two years earlier than originally anticipated
when we first announced the Lattice
acquisition with Beach having repaid
$950 million of outstanding debt in FY19.
We are well positioned to continue
investing in our portfolio of assets
under the multi-year exploration and
development program we have previously
outlined. This investment began in
earnest in FY19. Most visible via the
number of active rigs, with three operated
drill rigs and one non-operated drill rig
added during the year and contracts
executed for two additional drill rigs to
commence in FY20.
Beach enters FY20 planning significant
investment in its organic growth portfolio.
The business is focussed on precise
and safe execution of work programs,
which will include: drilling two of the
longest onshore to offshore wells drilled
in Australia, commencement of offshore
drilling activities in the Victorian Otway
Basin, elevated activity in the Cooper
Basin, reinvigoration of SA Otway Basin
as a gas producing region, and further
maturation of high impact exploration
prospects. Successful execution of these
work programs is our prime focus as
we strive to achieve our vision of being
Australia’s premier multi-basin upstream
oil and gas company.
We believe this investment will continue
to drive superior returns on shareholders
equity noting total shareholder return over
the last three years has been 270%.
Your board expanded during the
year to its full complement of nine
members. In February, we welcomed
Ms Sally-Anne Layman as a non-executive
director, at the same time also appointing
CEO Matt Kay, as Managing Director.
We are very pleased to welcome both
Sally-Anne and Matt to the Board.
Glenn Davis
Chairman
08
CHAIRMAN’S LETTER
Our people
have achieved
tremendous
results
throughout
the year
Our people have achieved tremendous
results throughout the year and
I congratulate them on and thank them
for their efforts. Their ability to deliver
safe and efficient work programs
together with disciplined capital allocation
will we believe continue to generate
shareholder value.
On behalf of the board, I thank all
shareholders for their continued support
as the company continues to grow with
a focus on generating returns for you,
our members.
Glenn Davis
Chairman
19 August 2019
ANNUAL REPORT 2019 09
ANNUAL REPORT 2019 09
BEACH ENERGY LIMITED Organic 2P reserves
replacement ratio
204%
Cooper Basin,
South Australia
Executing
our strategy,
delivering
on promises
and driving
best-in-class
returns
Managing
Director’s
Letter
Dear Shareholder,
Beach is executing its strategy, delivering
on promises and driving best in class
returns on investment. This has been a
focus from the moment we closed the
Lattice acquisition in FY18 and continued
in FY19 with tangible progress against our
ambitious targets.
Today Beach reports a very strong FY19
financial performance, delivering:
• An 85% increase in underlying net
profit after tax to $560 million
• Free cash flow of $559 million
underpinning $950 million of debt
repayments and putting our balance
sheet in a net cash position
• Record investment in the Beach
business with capital expenditure of
$447 million
• A world class return on capital
employed of 27%, reflecting disciplined
financial management and diligent
execution on our portfolio of organic
investment opportunities
• A 204% organic 2P reserves
replacement ratio.
We also reported our safest year and best
environmental performance on record.
10
Matt Kay
Managing Director and
Chief Executive Officer
Our FY19 financial performance was
underpinned by very strong operational
performance across the business, being a
display of the cohesive and team-oriented
approach of our functionally organised
work force. I want to take the opportunity
to highlight just some of the achievements
across our business.
Our drilling team oversaw the drilling
of 134 wells in FY19, a 40% increase
over FY18, and at improved drill rates,
particularly on our more technically
complex horizontal wells. There was a
24% improvement in spud-to-online time
from our first such well in FY18, to the four
well horizontal campaign in H1 FY19. Our
drilling success rate was 84% in FY19,
helping to drive an increase in Cooper
Basin production.
Our development team made good
progress on a number of growth initiatives,
including: completion of FEED activities
on Waitsia Gas Project Stage 2 with
our JV partner Mitsui E&P Australia in
the Perth Basin; completion of FEED
on the Kupe compression project in
New Zealand to extend the production
plateau; entering concept select phase
on Trefoil development in the Bass Basin;
commencing construction of the Katnook
gas facility in the South Australian Otway
Basin and preparing for drilling activity in
the Victorian Otway Basin.
MANAGING DIRECTOR’S LETTER
Also in the Victorian Otway Basin, during
the year we brought in a 40% joint venture
partner, O.G. Energy, for consideration
of $344 million. The introduction of
an aligned joint venture partner was a
strategic move by Beach. Over the coming
three years, O.G. Energy and Beach will
be undertaking a $1 billion exploration
and development program that will
bring significant new gas supplies to
the domestic east coast market. Beach
supplies approximately 15% of domestic
east coast gas demand and is proud to
undertake this significant commitment
to ensure the longer term supply of
Australian domestic gas.
With a fully integrated company, a balance
sheet in a net cash position less than 18
months after drawing almost $1 billion in
debt and a strong, stable gas business with
oil and gas liquids upside, Beach is in an
enviable position as we head in to FY20.
Our five year targets
Last year I commented on the high quality
opportunity set now available to Beach
and we followed this up at our September
2018 Investor Day with a deep dive on the
expanded asset portfolio and presentation
of Beach’s five year outlook.
We will continue to refine our forward
development plans and growth targets
as our business evolves and our
understanding of our assets increases
over time. Agility is an important
characteristic in oil and gas companies
such as Beach, allowing us to take
advantage of new opportunities and new
information as it arises. The one constant
remains our commitment to enhancing
shareholder value.
Environmental, Social and Governance
I want to comment on Beach’s
commitment to continual improvement
in Environmental, Social and Governance
(ESG) practices. In the face of a
transformational period for the company,
we are updating our policies and practices
in each of these areas to create the tools
and framework necessary to ensure good
ESG outcomes for all stakeholders as we
continue to grow the Beach business.
This year we refined our governance
structure so that climate change and
environmental matters fall under the
direct responsibility of the Board. Climate
change and the environment are important
to Beach. We have also made progress
against our TCFD reporting requirements. I
refer you to the sustainability pages of this
report for more discussion.
In the communities in which we operate,
we strive to be a good corporate citizen, an
organisation of whom the local community
can talk proudly. We are strong believers
in undertaking this from a grass roots level
which can be seen with our work in helping
fund local playgrounds, walking paths,
sponsoring local sporting clubs, providing
surf life saving club equipment, sponsoring
community college courses, opening our
land to local agriculture where it is safe.
We also entered a long term sponsorship
with the Royal Flying Doctors Service (SA/
NT) which provides the organisation with
funding and equipment critical to the
ongoing provision of the high quality, high
impact services the Royal Flying Doctor
Service provides.
Conclusion
The most visible change during the year was
the company rebranding and upgrading of
corporate headquarters to reflect a modern
organisation. This is a reflection of the new
Beach. We are a modern, diverse energy
company, striving to operate efficiently
and environmentally consciously and meet
the expectations of our local communities
and broader Australian market. We are
generating world class returns, have a high
quality opportunity set in which to continue
investing, and the financial strength to
support this. We look forward to the year
ahead and thank you for your support.
Yours sincerely,
Matt Kay
Managing Director & Chief Executive Officer
19 August 2019
ANNUAL REPORT 2019 11
ANNUAL REPORT 2019 11
Our operations crews led further
improvement in safety and environmental
performance which in turn assisted in our
outstanding facility reliability result, where
our six operated facilities averaged 97%
reliability for FY19. The team also extracted
over $20 million in operating cost savings,
on track to reach our target of $30 million
per annum by the end of FY20.
Commercially, we have aligned our
participating interests with joint venture
partners in the Bonaparte and Perth
basins, brought in an aligned partner in the
Victorian Otway Basin and entered newly
formed joint ventures in the Carnarvon and
Canterbury Basins. Aligned joint ventures
are an integral step in achieving our
mission of becoming a premier mid-cap
E&P company, so we are very pleased to
have reached these agreements. On the
gas marketing front, during the year we
added a new commercial customer for our
Western Flank gas, undertook a successful
price negotiation with Origin in relation
to a Victorian Otway gas supply contract
and in the Western Australia gas market,
agreed a supply agreement with Alinta for
20 TJ/day of Waitsia gas.
BEACH ENERGY LIMITED Executive
Team
2.
4.
6.
8.
1. Matthew Kay
MANAGING DIRECTOR &
CHIEF EXECUTIVE OFFICER
BEc, MBA, FCPA, GAICD
Mr Kay joined Beach in May 2016 as Chief
Executive Officer and was appointed
Managing Director in February 2019.
Mr Kay has over 25 years’ experience
in oil and gas and prior to joining Beach,
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
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.
2. 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
19 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 (formerly LGL), 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.
1.
3.
5.
7.
12
EXECUTIVE TEAM
3. Dawn Summers
CHIEF OPERATING OFFICER
BEng (Hons) (Chemical)
Ms Summers joined Beach in January 2018
as Chief Operating Officer bringing
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.
4. 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 bringing 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.
5. 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.
6. Geoff Barker
GROUP EXECUTIVE DEVELOPMENT
BSc, MEng (Pet Eng)
Mr Barker joined Beach in February 2018
as Group Executive Development bringing
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.
7. 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.
8. 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 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 upstream
oil and gas business across Australia,
Asia, Africa and the United Kingdom, Ms
Ford has been involved in numerous large
company transactions including M&A.
ANNUAL REPORT 2019 13
ANNUAL REPORT 2019 13
BEACH ENERGY LIMITED Our
Strategy
Beach undertook a
strategy review during
FY19 where its strategic
pillars were updated in
the context of the new,
enlarged organisation.
Optimise our core
production hubs
• Achieved average reliability
of 97% across Beach’s six
operated facilities in FY19.
Targeting >98% across all
facilities in FY20.
• Completed FEED on the Kupe
compression project which
seeks to extend production
plateau and field life.
• Achieved record Western
Flank oil production net
to Beach.
• Reduced Beach operating
costs per barrel from $9.7/boe
in FY18 to $9.3/boe in FY19.
• Ended FY19 having delivered
over $20 million in operating
cost reductions, on track
to meet our target of
$30 million per annum by
the end of FY20.
14
Grow additional
production hubs
• Commenced construction of
a 10 TJ/d gas facility in the
South Australian Otway Basin.
• Approved Waitsia Stage 1
expansion to 20 TJ/day and
completed FEED on Waitsia
Gas Project Stage 2.
• Acquired a 21% interest
in exploration permit WA-
359-P which includes the
Ironbark prospect. Rig
secured to drill the Ironbark
prospect in mid FY21.
• Subsequent to year end a
farm out agreement was
signed with O.G. Energy
in relation to PEP38264
in the Canterbury Basin,
New Zealand which contains
the Wherry and Gondola gas
prospects. The joint venture
committed to Stage 3 work
program, which includes a
commitment to drill one well
by October 2021.
Grow our east coast
gas business
• Awarded permit VIC/P73
in Victorian Otway Basin,
containing the La Bella gas
field enhancing the value
of existing reserves and
infrastructure.
• Plans for tie back of Trefoil
gas field progressed to
“concept select” phase as we
seek to extend the life of the
BassGas asset.
• Contracted rigs to undertake
the near shore and
offshore drilling programs
in the Victorian Otway
Basin. The exploration
and development drilling
program is expected to bring
new gas supplies to the east
coast domestic gas market.
• Added two operated Western
Flank drill rigs and a fourth
non-operated Cooper Basin
JV drill rig.
Maintain financial
strength
• Reported ROCE of 27% in
FY19.
• Repaid $950 million of debt,
ending FY19 in a net cash
position.
• Available liquidity of $622
million at 30 June 2019.
• Core gas business provides
revenue stability and
certainty of funding of
near term operating costs
and capital expenditure.
Provides insulation from oil
price volatility.
OPERATING REVIEW
FY15
FY16
FY17
FY18
FY19
Operating
Review
PERFORMANCE
OVERVIEW
Production
2P reserves1
2C contingent resources1
Sales revenue
MMboe
MMboe
9.1
74
MMboe
677
$ million
728
9.7
70
205
558
10.6
75
153
653
388
162
19.0
313
207
29.4
326
185
1,251
1,925
199
302
9.2
13.9
577
560
25.4
24.6
663
1,038
Net profit after tax
$ million
(514)
(589)
Underlying net profit after tax
$ million
91
36
Earnings per share
cps
(39.6)
(39.6)
20.4
Underlying earnings per share
cps
7.0
Cash flow from operating activities
$ million
229
2.4
233
8.5
319
Record
Beach
production
29.4
MMboe
Net assets
Net debt/(cash)
Gross gearing ratio
$ million
1,355
1,075
1,402
1,838
2,374
$ million
(20)
(49)
(198)
639
(172)
%
11.0
13.5
11.8
2.0
34.2
2.0
NA
2.0
Fully franked dividends declared per share
cents
1.50
0.50
Shares on issue
million
1,300
1,861
1,874
2,277
2,278
Share price at year end
$
1.05
0.61
0.575
1.755
1.985
Market capitalisation at year end
$ million
1,365
1,135
1,077
3,995
4,522
Average facility
reliability
97%
Three of Beach’s six
operated facilities achieved
>98% reliability in FY19.
Targeting >98% across all
facilities in FY20.
PRODUCTION
FY18
Oil
equivalent
(MMboe)
FY19
Oil
(MMbbl)
Gas liquids
(MMboe)
Western Flank
Cooper Basin JV
Other Cooper Basin
Perth Basin
SAWA
Otway Basin
Bass Basin
Victoria
New Zealand
6.1
5.9
0.2
0.4
12.7
3.7
1.1
4.8
1.5
Total Production
19.0
5.2
1.5
0.1
0.0
6.9
0.0
0.0
0.0
0.0
6.9
0.6
1.0
0.0
0.0
1.6
1.0
0.4
1.4
0.9
4.0
Gas
(PJ)
7.4
32.3
0.5
3.9
44.1
43.0
7.5
50.5
12.9
Oil
Equivalent
(MMboe)
Year-on-year
change (%)
7.1
8.1
0.2
0.7
16.1
8.4
1.7
10.1
3.2
16%
37%
11%
59%
27%
125%
59%
110%
115%
55%
107.4
29.4
1. Refer to Reserves Statement for the year ended 30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
ANNUAL REPORT 2019 15
ANNUAL REPORT 2019 15
BEACH ENERGY LIMITED
Operating Review
continued
FINANCE
We start FY20 a fully integrated company
having realised our $60 million per annum
synergy target, repaid all term debt and
with the balance sheet and operational
capability to execute on our long term
investment strategy
Finance and technology are key value
drivers at any company, but particularly
so at Beach during a period of acquisition
and integration.
A key component of integration was
unifying all corporate systems into one
integrated IT system. This completed in
December 2018 when Beach discharged
the Transition Services Agreement with
Origin. This was a key achievement of
the first half of FY19 and underpinned not
only the realisation of the $60 million per
annum synergy target, but also puts the
business in a technologically advanced
position from which we can apply the
Beach low cost operator model.
The other headline achievement of the
financial year came in May 2019 when our
balance sheet entered a net cash position,
less than 18 months after we drew down
almost $1 billion in debt and more than two
years ahead of initial expectations. This
came upon completion of the sell down
of the 40% stake in the Victorian Otway
assets to O.G. Energy for $344 million.
FY19 was a year of volatility in the price of
oil as Brent ranged between approximately
US$50 and US$86 during the year. With
a substantial, stable gas business, Beach
now generates a sizeable portion of our
revenues from gas. In recognition of this
and our rapid de-gearing, we allowed
our oil hedge book to roll off over the
course of FY19. Beach has no hedging in
place at year end. This position is actively
monitored and reviewed by management
and the board as we seek to ensure our
strategic pillar of maintaining financial
strength continues to be met.
In addition to the strategic pillar of
maintaining financial strength, during FY19
Beach outlined a key financial target of
continuing to generate a return on capital
employed (ROCE) of 17–20%. In FY19 we
have exceeded this target, reporting a
ROCE of 27%, driven by a combination of
improved production performance, and
reductions in per boe operating costs.
At our FY18 Annual General Meeting
held in November 2018, our Chairman
confirmed that Beach remains very much a
growth-oriented company, with our capital
allocation priority directed to investment
in value-accretive growth initiatives. We
have ended FY19 in a net cash position,
with available liquidity of $622 million,
placing Beach in a strong position
from which to launch its FY20 organic
investment program which is expected
to be one of the largest investment years
undertaken by Beach.
Morné Engelbrecht
Chief Financial Officer
ACHIEVED
SYNERGY TARGET
$60m
per annum
RETURN ON
CAPITAL EMPLOYED
27%
FY19
16 16
OPERATING REVIEW
achieved record average reliability of 97%
across our six operated facilities contributing
to Beach achieving FY19 production of 29.4
MMboe, ahead of our initial FY19 guidance
range of 26 – 28 MMboe.
Beach continued applying its low cost
operating model, identifying further
efficiency opportunities whilst at the
same time maintaining a balance with
safety and production performance. We
made excellent progress in FY19, and are
on track to meet the 20% sustainable
cost reduction target by the end of FY20,
which would equate to approximately
$30 million per annum of savings. These
cost efficiencies are being achieved in
areas such as logistics, maintenance
planning and scheduling efficiency
improvements, technology collaboration
with our JV partners and basin operator
synergies. By the end of FY19 Beach has
already delivered over $20 million of direct
operating cost savings.
This combination of improved facility
reliability and application of Beach’s low
cost operator principles helped Beach
achieve a 5% reduction in operating costs
per boe to $9.3/boe in FY19, with Beach’s
operated Cooper Basin assets continuing
to operate at less than $5/boe.
Dawn Summers
Chief Operating Officer
OPERATIONS
In FY19 Beach continued to
achieve important milestones
and deliver value through
implementation of Operational
Excellence: Safe, Reliable and
Efficient operations, across our
expanded portfolio of offshore
and onshore operations in all
five basins.
Most importantly, our portfolio of
offshore and onshore assets continued
safe operations throughout the integration
process, which completed during the
year and where we fully realised our
$60 million per annum synergy target.
Focus has concurrently moved ahead with
the launch of our Operational Excellence
program with the mission to generate
value through safe, reliable and efficient
operations. Getting this right underpins
our growth agenda.
The Operational Excellence program
supported another set of strong results
in FY19, a highlight being our continuous
improvement in safety performance.
Our focus on process safety has seen
us report our safest year on record.
Significantly, Beach had no material
process safety events recorded since we
began operatorship of the former Lattice
assets, which is an indicator of how we are
ensuring our people are out of harm’s way
and running our plants safely. In addition,
our crude spill volumes continue to reflect
best in class performance.
Our focus on improving reliability through
use of industry best practice and smart
technology, the most visible example being
the application of drone technology to assist
infrastructure inspections, is helping to
improve both safety and base production
across our facilities. In FY19 Beach has seen
further improvement in facility reliability and
AVERAGE FACILITY
RELIABILITY1
95%
97%
FY18
FY19
OPERATING COSTS2
$/boe
5%
9.3
9.7
FY18
FY19
1. Average facility reliability measured across the six
Beach-operated facilities.
2. Operating costs per boe is for the entire group and
includes both operated and non-operated assets.
Operating costs exclude royalties, tolls, tariffs and
third-party purchases.
ANNUAL REPORT 2019 17
ANNUAL REPORT 2019 17
BEACH ENERGY LIMITED Operating Review
continued
EXPLORATION AND APPRAISAL
Our exploration and appraisal
activities are designed to extend
the life of our core businesses
and feed the longer term growth
objectives of the company.
Our appraisal strategy is designed to
optimise recovery from our fields in
the most cost effective way possible,
achieving this by understanding the size
and distribution of hydrocarbons as early
as possible in the field development cycle.
We are also leveraging our development
activities, applying modern technologies to
obtain appraisal information – minimising
appraisal costs, driving portfolio value.
Cooper Basin
During the year we announced a step up in
our appraisal activity in the Cooper Basin,
which we have coined the “Bauer Strategy”.
This calls for the drilling of appraisal
wells with larger step out distances from
existing wells to define boundaries of our
producing oil and gas fields. Once field
limits are defined, full field development
plans are formulated, focussed on
adequate in-fill spacing and ultimately a
line of sight to the number of wells to fully
monetise the asset.
The Bauer Strategy includes the ongoing
refinement to our geotechnical methods
as well as the application of modern
technologies. These include geo-steering
horizontal wells to collect appraisal
information, in-well-bore seismic studies,
3D structural modelling and advanced
pad-drilling techniques to lower cost
per well. The objective is to increase
our chance of success and minimise the
finding and development cost per barrel.
Implementing the strategy in FY19 yielded
extensions of the Bauer and Hanson
oil fields and the Lowry gas field in the
Western Flank, identifying additional
drilling opportunities. This strategy will
continue to be rolled out across the
Western Flank.
Victorian Otway Basin
The Otway Basin is a proven petroleum
province with exploration and appraisal
potential in Beach’s operated fields and
exploration permits. We are applying
a new “whole-of-basin” approach that
incorporates best-in-class 3D seismic data
covering over 9,000 square kilometres,
integrating all existing offshore 3D surveys.
Analysis of the integrated data set has
yielded better understanding of the
discovered gas resources, identification
of new prospects and leads, as well as
validating our view of the commercial
prospectivity of the undeveloped La Bella
gas field which Beach acquired when
awarded permit VIC/P73 in February 2019
after participating in a gazettal process.
Perth Basin
In FY19 we contracted the Easternwell
106 onshore rig to drill the Beharra Springs
Deep exploration well in the first half of
FY20. The well will test the potential of
the prolific Kingia and Highcliff sandstones,
which are the primary productive
reservoirs at the nearby Waitsia gas
field. Several other high impact prospects
targeting the same play will be matured for
drilling with the Trieste 3D survey planned
for H2 FY20. Our alignment across the
Perth Basin with MEPAU was enhanced
recently when the companies entered into
an agreement to move to 50:50 ownership
across all licences.
Frontier Exploration
Looking to the longer term, we have
made clear progress across three high
impact, geographically diverse frontier
exploration plays.
In the Carnarvon Basin, the WA-359-P
(Ironbark) JV was formed with BP as
operator and is progressing towards
drilling the Ironbark prospect in late 2020.
In the Bonaparte Basin, Beach and Santos
reached agreement to align interests
at 50% across four exploration blocks,
with Santos taking operatorship and the
lead in maturing several new play types
towards drilling.
In the Canterbury Basin a farm out process
was undertaken, bringing in O.G. Energy as
the joint venture works towards drilling a
commitment well by October 2021.
Jeff Schrull
Group Executive – Exploration
and Appraisal
Basin
Target Type
Wells drilled
Successful
Cooper /
Eromanga Basins
Oil
Exploration
Appraisal
Development
Gas
Exploration
Appraisal
Development
Total wells drilled
12
24
23
11
26
38
134
3
19
22
10
22
36
112
73 exploration and appraisal wells were drilled in FY19 at a 74% success rate
Rate
25%
79%
96%
91%
85%
95%
84%
18 18
Horizontal
wells have
the potential
to add
substantial
value to the
business
OPERATING REVIEW
DEVELOPMENT
Cooper Basin
In FY19, Beach participated in 61
development wells in the Cooper
Basin as we ended the year with three
operated drilling rigs (+2 from FY18)
and four non-operated drilling rigs
(+1 from FY18).
In the Western Flank, the successful
application of horizontal drilling technology
targeting the McKinlay and Birkhead
reservoirs helped increase net Western
Flank oil production to 5.2 MMbbl, a 10%
increase over FY18. Horizontal wells have
the potential to add substantial value to
the business as we have seen such wells
perform over eight times more productively
than a vertical well, at 1.5 times the cost
to drill, complete and connect. A total of
eight horizontal wells were drilled and
completed across the Beach-operated
Bauer, Pennington and CKS fields and
Senex-operated Growler Field. The four
Bauer horizontal wells added an estimated
7,000 bopd on artificial lift (30 day initial
production rate), after achieving an
average spud to online time of 24 days.
Beach plans to increase the number of
horizontal development wells in FY20.
In the Cooper Basin JV Beach is supporting
operator Santos in its development plans
to maintain or increase production. The
addition of a fourth Cooper Basin JV
drilling rig has provided capacity to drill
more wells. We were pleased to see
an increase in the number of oil wells
drilled in the Cooper Basin JV in FY19
after the early success in Queensland at
the Watson and Watkins fields. Follow
up drilling and a full year of increased
ownership helped support an increase
in Cooper Basin JV oil production, net to
Beach, to 1.5 MMbbl, an 82% increase
over FY18 levels. The operator continues
to drive cost out which increases the
portfolio of opportunities available.
Perth Basin
In the Perth Basin, our development team
worked closely with partner and operator,
MEPAU, in the evaluation of different
development options for the Waitsia gas
field including brownfield and greenfield
expansion options. Final investment
decision (FID) was reached on Waitsia
Stage 1 expansion of the Xyris facility to
20 TJ/day while front end engineering
design (FEED) was completed on Waitsia
Gas Project Stage 2 (100 – 250 TJ/day).
SA Otway Basin
Construction of a 10 TJ/d gas facility has
commenced at the site of the previous
Katnook facility, which was successfully
remediated. First gas is scheduled for
mid FY20.
New Zealand
In New Zealand, FEED was completed
on the Kupe onshore compression project
to extend the field’s production plateau
and increase recovery by accessing
undeveloped reserves. FID is currently
targeted for Q1 FY20 and first gas by
late FY21.
Bass Basin
In the Bass Basin, the Trefoil Field
development planning progressed moving
to the “concept select” phase which aims
to reduce subsurface and development
uncertainties to a point where an
investment decision can be taken.
Victorian Otway Basin
While in the Victorian Otway Basin, rigs
were contracted to undertake our near
shore and offshore development programs
which include the extended reach Black
Watch development well and six offshore
development wells.
Geoff Barker
Group Executive – Development
Cooper Basin,
South Australia
ANNUAL REPORT 2019 19
ANNUAL REPORT 2019 19
BEACH ENERGY LIMITED Operating Review
continued
Operations
Western Flank oil operations accounted
for 18% of Beach’s FY19 production. The
connection of new oil wells and artificial
lift saw Beach’s share of Western Flank
oil production increase to a record
5.2 MMbbl, representing a 10% increase
on FY18 levels.
Strong performance was underpinned
by optimisation of activities including
timeliness of well on-line times to
enable early production and appropriate
artificial lift installation.
WESTERN FLANK
OIL AND GAS
FY19 PRODUCTION
7.1MMboe
(24% of Beach’s total production)
2P RESERVES1
58MMboe
(72% oil, 28% gas and gas liquids)
FY19
Highlights
Increased drilling activities with third
Western Flank drill rig added.
Eight operated and non-operated
horizontal oil wells successfully drilled.
Successful oil appraisal programs in
Bauer and Hanson fields, extended
field limits and validated the
‘Bauer Strategy’ for field appraisal.
Successful gas exploration and
appraisal programs in Lowry and
Udacha South fields extended field
limits and discovered new field.
Further expansion of Middleton
facility via increased liquids handling
capacity to underpin Western Flank
gas production.
FY20
Focus
Continued roll out of the Bauer
strategy for appraisal across fields
including Parsons and Congony-
Kalladeina-Sceale field complex,
as well as follow-up appraisal drilling
at Bauer and Hanson.
Follow up the horizontal drilling
success with up to 16 more horizontal
wells in FY20.
Expansion of surface facilities to
accommodate higher production
volumes.
Commence drilling prospects
identified by Spondylus 3D
seismic survey.
1. Refer to Reserves Statement for the year ended 30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
20 20
Western Flank gas operations accounted
for 6% of Beach’s FY19 production.
Western Flank gas/gas liquids production
increased to 1.9 MMboe in FY19,
representing a 35% increase on FY18
levels. The increase in gas and gas liquids
output was underpinned by improved
reliability and the capacity expansion of
the Middleton gas facility resulting in
FY19 being Beach’s best ever operated
gas and gas liquids production from the
Cooper Basin.
Development
Beach participated in 19 Western Flank oil
and gas development wells with an overall
success rate of 95%.
Notable outcomes were:
• Six Beach-operated, and two Senex-
operated, horizontal oil development
wells were drilled; one each on the
Pennington and Kalladeina fields, two on
the Growler Field, and four on the Bauer
Field. All wells were successful. The
aggregate 30 day initial production rate
from the four wells drilled on the Bauer
Field was approximately 7,000 bopd on
artificial lift.
• A five vertical well Bauer oil development
campaign completed at a 100% success
rate in the fourth quarter.
• Hanson-7 oil development well
confirmed a southern extension to the
field. The well had a strong initial flow
rate of 2,600 bopd and was converted
to artificial lift (ESP) at the end of the
year to bring forward production.
• Liquids handling capacity was expanded
at the Middleton facility increasing
the facility’s raw gas capacity to
40 MMscfd and helping achieve higher
gas and gas liquids production volumes.
Exploration and Appraisal
Beach participated in 23 Western Flank
oil and gas exploration and appraisal wells
with 14 wells cased and suspended as
future producers (seven oil and seven gas
wells), equivalent to a success rate of 61%.
Appraisal activities were highlighted by
campaigns on the Bauer and Hanson oil
fields (ex PEL 91) and the Lowry gas field
(PRL 26), designed to delineate the lateral
extent of each field and assist with full field
development plans. Positive results saw an
increase in 2P reserves at each of the fields
at 30 June 2019. Further appraisal drilling
OPERATING REVIEW
is required in both Hanson and Bauer
to follow up the initial success, and will
be undertaken in FY20, ahead of full
field development.
In non-operated Western Flank, Senex
undertook a seven-well oil exploration
and appraisal program which yielded
two new producers and defined core
Birkhead play area in the ex PEL
104/111 acreage in which Beach holds
a 40% non-operated position.
Beach received and processed the
Spondylus 3D seismic survey which
covers the southern portion of the
Western Flank Gas play fairway (ex
PEL 107). A number of prospects and
leads have already been defined, with
Beach intending to drill up to four
wells in FY20.
Commercial
Beach executed a GSA with Liberty
Primary Steel and now has GSAs with
Adelaide Brighton, Alinta Energy and
Liberty to supply Western Flank gas
in 2019.
Description
Western Flank oil producing areas
are 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 gas producing areas
are ex PEL 106 (Beach 100%), ex PEL
91 (Beach 100%) and the Udacha
Block — PRL 26 (Beach 100%). Other
licences include PEL 630 (Beach 50%
and operator, Bridgeport 50%).
Cooper Basin,
South Australia
ANNUAL REPORT 2019 21
ANNUAL REPORT 2019 21
BEACH ENERGY LIMITED Operating Review
continued
Operations
The Cooper Basin JV operations accounted
for 28% of Beach’s FY19 production.
Net gas and gas liquids production
of 6.6 MMboe was up 29% from the
prior year and comprised sales gas of
5.6 MMboe and gas liquids of 1.0 MMboe.
This was driven by the full year of
increased Cooper Basin JV ownership
and new well connections after higher
drilling activity.
Net oil production of 1.5 MMbbl was
up 82% on the prior year driven by the
full year of increased Cooper Basin JV
ownership and the strong results of the
Watson and Watkins oil exploration and
appraisal programs.
Exploration, Appraisal and Development
Beach participated in 92 Cooper Basin
JV wells, seven gas exploration, 22 gas
appraisal, 38 gas development, seven oil
exploration, 14 oil appraisal and four oil
development wells.
Highlights from the FY19 drilling
program included:
• Overall success rate of 87%.
• Successful Moomba South gas appraisal
campaign which saw seven of the eight
drilled wells brought into production.
Beach and Santos are working to identify
further locations to roll out the Moomba
South appraisal strategy.
• Southwest Queensland oil appraisal
success highlighted by a three well
campaign in the Watkins Field, with a
peak production add of 3000 bopd.
• Southwest Queensland gas exploration
success at Anna North, Aztec, Lane,
Bearcat and Tillamook.
Description
Beach owns 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.
COOPER BASIN
JOINT VENTURE
FY19 PRODUCTION
8.1MMboe
(28% of Beach’s total production)
2P RESERVES1
84MMboe
FY19
Highlights
Increased drilling activities
with fourth Cooper Basin JV drill
rig added.
Successful Moomba South gas
appraisal program.
Continued focus on oil targets,
with 25 oil wells drilled in FY19.
FY20
Focus
Increasing activity levels including
focus on horizontal wells.
Accelerated pilots for the
Patchawarra in Moomba South.
Continued focus on operating
efficiencies, such as shifting beam
pumps to solar and battery power
and other cost-outs.
1. Refer to Reserves Statement for the year ended
30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
22 22
Cooper Basin,
South Australia
OPERATING REVIEW
Operations
Perth Basin operations accounted for
2% of Beach’s FY19 production. Perth Basin
production of 0.7 MMboe was 59% higher
than the prior year due to the Perth Basin
assets being consolidated for the entire
FY19 reporting period.
Commercial
Subsequent to year end, Beach and
MEPAU entered into an agreement that
will result in the two entities moving to a
50% interest in production licences L11
and L22, exploration permit EP 320 and
pipeline licence PL18.
Development
The Waitsia joint venture continued to
progress commercialisation plans for
Waitsia Gas.
Beach and MEPAU signed a GSA with
Alinta Energy for the supply of up to
20 TJ/day of gas from the Waitsia Field,
commencing 1 July 2020 with a duration
of 4.5 years. Detailed engineering has
commenced on the Stage 1 expansion
of the Xyris gas processing facility
from 10 to 20 TJ/day output. Stage 1
expansion incorporates a large diameter
pipeline (with capacity for future Stage 2
production volumes) connecting the Xyris
facility to the DBNGP.
Waitsia Gas Project Stage 2 development
progressed with the completion of
FEED and issue of EPC tenders for the
construction of a 100 – 250 TJ/day facility.
FID is currently anticipated in FY20.
Exploration and Appraisal
The Easternwell 106 rig has been
contracted to drill the Beharra Springs
Deep-1 gas exploration well, currently
expected in H1 FY20.
These tenements contain the Beharra
Springs and Redback gas fields and
associated gas processing facilities, the
Beharra Springs Deep exploration prospect
and the underexplored EP320 where Beach
will undertake the Trieste 3D seismic
survey to mature several prospects already
identified on lower quality 2D seismic.
Beach will remain operator of these
tenements.
Description
Producing licence areas are Waitsia
(Beach 50%, MEPAU 50% and operator)
in licence L1/L2 and Beharra Springs
(Beach 67% and operator, MEPAU 33%)
(pending completion of a 17% sell down
described under “Commercial”), in
licences L11 and L22.
In FY19 gas from the Waitsia gas field
was processed at the Xyris gas processing
facility. Gas from Beharra Springs was
processed at the Beharra Springs gas
processing facility.
1. Refer to Reserves Statement for the year ended 30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
ANNUAL REPORT 2019 23
ANNUAL REPORT 2019 23
PERTH BASIN
FY19 PRODUCTION
0.7MMboe
(2% of Beach’s total production)
2P RESERVES1
73MMboe
FY19
Highlights
GSA executed with Alinta Energy for
delivery of 20 TJ/d from July 2020.
FID reached on Waitsia Stage 1
expansion to 20 TJ/day.
Beach and MEPAU agreed to
align interests 50:50 across the
Perth Basin.
Easternwell 106 rig contracted
to drill Beharra Spring Deep-1
exploration well in FY20.
FEED completed and EPC tenders
in progress on Waitsia Gas Project
Stage 2.
FY20
Focus
Drill Beharra Springs Deep-1
exploration well
Commence construction of Waitsia
Stage 1 expansion
FID on Waitsia Gas Project Stage 2.
Trieste 3D seismic survey
Maintain high facility reliability
BEACH ENERGY LIMITED Operating Review
continued
VICTORIAN OTWAY BASIN
FY19 PRODUCTION
8.4MMboe
(29% of Beach’s total production)
2P RESERVES1
62MMboe
FY19
Highlights
High facility reliability and
customer nominations supported
production of 8.4 MMboe up 125%
on FY18.
Acquisition the La Bella gas field.
Onshore and offshore rigs
contracted and scheduled to
commence drilling operations
in FY20.
FY20
Focus
Commencement of the near shore
and offshore drilling programs in the
Victorian Otway Basin.
Hookup of Black Watch-1 to the
production facilities.
Pre-planning for the Enterprise-1
pipeline.
Safe and efficient execution of
Otway Gas Plant Major Campaign
Turnaround.
Maintain high facility reliability.
24 24
Operations
Otway Basin operations accounted for
29% of Beach’s FY19 production. Otway
Basin production was 8.4 MMboe, 125%
higher than FY18 due to consolidating
the Victorian Otway assets for the entire
reporting period (at 100% until 31 May
2019 and 60% thereafter), improved
plant reliability and higher customer gas
nominations.
Development, Exploration and Appraisal
Activities during FY19 related to pre-drill
preparation including rig contracting,
for the near shore and offshore drilling
activities expected to commence in FY20.
Once drilling is completed in the South
Australian Otway in early FY20, the Ensign
931 rig will move to Victoria to drill the
near shore Black Watch development
well and Enterprise exploration well using
extended reach technology from onshore
drilling locations. At approximately 7kms
in length, Black Watch-1 will be one of the
longest onshore wells in Australia.
Semi-submersible rig Ocean Onyx, has
been contracted to undertake the offshore
drilling campaign currently expected
to commence with the Artisan-1 gas
exploration well.
Commercial
Beach completed the 40% sell-down
of its Victorian Otway Assets to O.G.
Energy on 31 May 2019.
Beach was awarded VIC/P73 containing
the undeveloped La Bella gas field which
is located in the offshore Otway Basin
in Victoria, within tie-back distance to
Beach’s existing infrastructure.
Description
Victorian Otway Basin (Beach 60%
and operator) includes licenses VIC/
L1(v) which contain the Halladale, Black
Watch and Speculant near shore gas
fields and licences VIC/L23, T/L2 and
T/L3 which contain the Geographe
and Thylacine offshore gas fields.
Victorian Otway Basin also includes
non-producing offshore permits VIC/
P42(v) and VIC/P43 (Beach 60%
and operator), VIC/P73 (La Bella) and
T/30P (Beach 100% and operator). Gas
from all producing fields is processed at
the Otway Gas Plant.
1. Refer to Reserves Statement for the year ended 30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
OPERATING REVIEW
Thylacine offshore platform,
Victorian Otway Basin
ANNUAL REPORT 2019 25
ANNUAL REPORT 2019 25
BEACH ENERGY LIMITED Operating Review
continued
BASSGAS
FY19 PRODUCTION
1.7MMboe
(6% of Beach’s total production)
2P RESERVES1
20MMboe
Operations
BassGas accounted for 6% of Beach’s
FY19 production. BassGas production
was 1.7 MMboe up 59% over FY18 due
to BassGas being consolidated for the
entire FY19 reporting period and improved
facility reliability.
Development
Evaluation of the Trefoil, Rockhopper and
White Ibis gas fields was carried out in
FY19. The study high-graded the Trefoil gas
field which moved to the “concept select”
phase, with more work, such as 3D seismic
acquisition, required at the other fields.
Development studies will continue in FY20.
Description
The BassGas Project (Beach 53.75% and
operator, MEPAU 35%, Prize Petroleum
International 11.25%), produces gas from
the Yolla field, situated approximately
140 kilometres off the Gippsland coast
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. Beach also holds a 50.25%
operated interest in licenses TR/L2, TR/L3,
TR/L4 and TR/L5.
FY19
Highlights
Progressed the evaluation
of a potential tieback of the
Trefoil Field moving to “concept
select” phase.
FY20
Focus
Continue development studies on
Trefoil, Rockhopper and White Ibis
gas fields.
Maintain high facility reliability.
1. Refer to Reserves Statement for the year ended
30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
26 26
Lang Lang gas plant, Victoria
OPERATING REVIEW
NEW ZEALAND – KUPE
FY19 PRODUCTION
3.2MMboe
(11% of Beach’s total production)
2P RESERVES1
27MMboe
Operations
New Zealand operations accounted for
11% of Beach’s FY19 production. Net
New Zealand production in FY19 was
3.2 MMboe up 115% over FY18 driven
by consolidating the New Zealand assets
for the entire reporting period, strong
customer demand which was supported
by high facility reliability. Beach achieved
reliability of greater than 99% at Kupe
production station in FY19.
Development, Exploration and Appraisal
Development activities focussed on the
Kupe onshore compression project which
completed FEED during FY19. Exploration
and appraisal activities saw the Kupe and
Kerry seismic surveys reprocessed. The
data from the reprocessing is intended
to facilitate a refresh of the near-field
exploration portfolio around the Kupe field.
Description
New Zealand operations comprises Kupe
(Beach 50% and operator, Genesis 46%,
NZOG 4%) in the Taranaki Basin. Kupe
produces gas from the Kupe field, situated
approximately 30 kilometres off the New
Zealand North Island, in licence PML38146.
Gas from the Kupe field is piped to the
onshore Kupe production station.
New Zealand
facility reliability
99%
FY19
Highlights
High reliability of >99% achieved
at Kupe production station.
Amine system statutory inspection
scope successfully executed.
FEED completed for Kupe
compression project.
FY20
Focus
Progress the Kupe onshore
compression project to FID.
Safe and efficient execution of
Kupe Major Campaign Turnaround.
Maintain high facility reliability.
1. Refer to Reserves Statement for the year ended
30 June 2019 on pages 30 – 35 of this report for
additional disclosures.
Kupe wellhead platform,
Taranaki Basin, New Zealand
ANNUAL REPORT 2019 27
ANNUAL REPORT 2019 27
BEACH ENERGY LIMITED Operating Review
continued
GROWTH ASSETS
SA Otway Basin
Drilling commenced on a two-well
campaign which will include the Dombey-1
gas exploration well (Beach 70%)
following the Haselgrove-4 gas appraisal
well (Beach 100%) a follow-up to the
Haselgrove-3 discovery in FY18.
Construction of a 10 TJ/d gas facility has
commenced at the site of the previous
Katnook facility, which was successfully
remediated. First gas is scheduled for
mid FY20. A modular design concept has
been chosen which can accommodate
an expanded plant capacity based upon
results of the current two-well campaign.
Carnarvon Basin
Significant progress was made in the
Carnarvon Basin, offshore Western
Australia, where Beach acquired a
21% equity interest in WA-359-P after
approval was obtained for a 24-month
suspension and extension of exploration
permit WA-359-P. The WA-349-P joint
venture comprises BP 42.5% and operator,
Cue 21.5%, Beach 21% and NZOG 15%.
The Ocean Apex offshore rig has been
contracted to drill the Ironbark prospect
in late calendar year 2020.
Beach retains a call option over a
7.5% interest in neighbouring WA-409-P.
Bonaparte Basin
Beach and Santos agreed to align interests
across four Bonaparte Basin exploration
blocks, which will now be owned
Santos 50% and operator, Beach 50%.
This provides joint venture alignment
to progress drill ready targets in the
coming years.
Canterbury Basin
Subsequent to year end a farm out
agreement was signed with O.G. Energy
in relation to PEP38264 in the Canterbury
Basin, New Zealand which contains the
Wherry and Gondola gas prospects.
Subject to regulatory approvals of the farm
out, PEP38264 will become Beach 37.5%
and operator, OGOG 37.5% and Discover
Exploration 25%.
A Change of Conditions to extend
Stage 3 of the work programme was
submitted to and approved by the NZ
regulator in Q4 FY19. The PEP38264
Joint Venture subsequently committed to
the Stage 3 work program, which includes
the requirement to drill one well by
October 2021.
28 28
OPERATING REVIEW
Otway Basin,
South Australia
ANNUAL REPORT 2019 29
ANNUAL REPORT 2019 29
BEACH ENERGY LIMITED Reserves Statement
Net to Beach at 30 June 2019
BEACH ENDED FY19 WITH 2P OIL AND GAS RESERVES OF 326 MMBOE
Proved plus probable (2P) reserves increased by 13 MMboe
from the prior year to 326 MMboe at 30 June 2019, resulting in a
204% organic reserves replacement ratio.
Western Flank oil and gas had total revisions of 22 MMboe resulting from exploration
and appraisal success, reclassification of 2C contingent resources to 2P reserves and
reservoir performance.
27 MMboe of Otway Basin 2P reserves were divested via the Otway sale, this was
partially offset by 8 MMboe for the La Bella acquisition and 14 MMboe of other
revisions as a result of updated reservoir modelling and field development planning (all 2P
developed and undeveloped).
2C contingent resources reduced by 22 MMboe to 185 MMboe, with the majority of
the change due to migration to 2P reserves.
Key Metrics
Proved reserves (1P)
Proved plus probable reserves (2P)
Proved plus probable plus possible reserves (3P)
2C contingent resources
Organic 2P reserves replacement ratio
Inorganic 2P reserves replacement ratio
2P reserves life (years)
Note
FY18
(MMboe)
FY19
(MMboe)
190
313
491
207
368%
938%
11.0
201
326
514
185
204%
141%
12.4
1
2
3
All reserve and resource figures are quoted net of fuel; due to rounding, figures and ratios throughout this report may
not reconcile to totals.
1P RESERVES
(MMboe)
6%
201
190
30
38
250
200
150
100
50
0
360
0
2P RESERVES
(MMboe)
4%
326
313
70
75
2P RESERVE LIFE
(years)
13%
12
11
7
7
15.0
12.5
10.0
7.5
5.0
2.5
0.0
FY16
FY17
FY18
FY19
FY16
FY17
FY18
FY19
FY16
FY17
FY18
FY19
30
RESERVES STATEMENT
PROVED RESERVES (1P) (NET TO BEACH)
ALL PRODUCTS (MMBOE)
Note
FY18
FY19
Production
Acquisi-
tions/
divestments
Exploration/
Appraisal
Contingent
Resources
to Reserves
Other
Total
Revisions
FY19
4
5
6
7
8
9
10
11
22
3
43
0
45
51
7
18
5
2
8
0
1
8
2
3
190
29
–
–
–
–
–
(11)
–
–
(11)
3
–
–
–
–
–
–
–
3
1
–
–
–
1
1
10
–
12
3
8
11
(0)
4
8
1
1
7
8
11
(0)
5
(3)
11
1
23
10
46
0
50
40
16
16
36
40
201
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
Otway Basin
Bass Basin
Taranaki Basin
Total
PROVED RESERVES (1P) (NET TO BEACH)
LPG
(kt)
Condensate
(MMbbl)
Oil
(MMbbl)
Total
(MMboe)
Developed
Undeveloped
ALL PRODUCTS (MMBOE)
Note
4
5
6
7
8
9
10
11
Gas
(PJ)
–
36
212
0
288
203
71
67
–
202
408
1
–
360
175
293
0
2
3
0
0
2
2
2
23
–
3
–
–
–
–
–
23
10
46
0
50
40
16
16
15
10
39
0
13
14
4
8
8
–
7
0
37
26
11
8
97
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
Otway Basin
Bass Basin
Taranaki Basin
Total
878
1,439
12
26
201
103
All reserves in the tables above are conventional.
ANNUAL REPORT 2019 31
ANNUAL REPORT 2019 31
BEACH ENERGY LIMITED Reserves Statement
continued
PROVED AND PROBABLE RESERVES (2P) (NET TO BEACH)
ALL PRODUCTS (MMBOE)
Note
FY18
FY19
Production
Acquisi-
tions/
divestments
Exploration/
Appraisal
Contingent
Resources
to Reserves
Other
Total
Revisions
FY19
4
5
6
7
8
9
10
11
34
9
84
0
72
75
9
30
5
2
8
0
1
8
2
3
–
–
–
–
–
(18)
–
–
8
–
4
–
–
–
–
–
313
29
(18)
12
1
–
1
–
7
1
13
–
23
4
9
3
(0)
(6)
14
(0)
0
25
13
9
8
(0)
1
(3)
13
0
42
16
84
0
73
63
20
27
42
326
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
Otway Basin
Bass Basin
Taranaki Basin
Total
PROVED AND PROBABLE RESERVES (2P) (NET TO BEACH)
Note
4
5
6
7
8
9
10
11
Gas
(PJ)
–
60
378
1
424
319
90
117
LPG
(kt)
Condensate
(MMbbl)
Oil
(MMbbl)
Total
(MMboe)
Developed
Undeveloped
ALL PRODUCTS (MMBOE)
–
345
732
3
–
540
221
510
0
3
6
0
0
4
3
3
42
–
7
–
–
–
–
–
42
16
84
0
73
63
20
27
23
16
69
0
16
17
5
11
19
–
16
0
57
46
15
17
1,388
2,351
19
49
326
157
169
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
Otway Basin
Bass Basin
Taranaki Basin
Total
All reserves in the tables above are conventional.
32 32
RESERVES STATEMENT
2C CONTINGENT RESOURCES (NET TO BEACH)
ALL PRODUCTS (MMBOE)
Acquisi-
tions/
divestments
Note
FY18
Contingent
Resources
to
Reserves Revisions
FY19
Western Flank Oil
Western Flank Gas
Cooper Basin JV
Other Cooper Basin
Perth Basin
Otway Basin
Bass Basin
Taranaki Basin
Bonaparte Basin
6
3
55
19
32
17
29
3
20
12
13
Total Conventional 2C Contingent Resources
183
Cooper Basin JV (Unconventional)
14
24
Total 2C Contingent Resources
207
–
–
–
–
–
(1)
–
–
3
2
–
2
1
–
1
–
7
1
13
–
–
23
–
23
3
(2)
(4)
(1)
14
–
(11)
1
–
2
(3)
(1)
Gas
(PJ)
–
4
188
40
228
90
16
12
8
1
50
18
39
16
5
4
23
128
164
706
21
97
185
804
606
Conden-
sate
(MMbbl)
LPG
(kt)
Oil
(MMbbl)
Total
(MMboe)
–
32
233
4
–
9
72
52
–
401
206
–
0
2
0
0
0
2
1
1
6
3
9
8
–
14
11
–
–
0
0
–
33
–
33
8
1
50
18
39
16
5
4
23
164
21
185
Notes
1. FY19 organic 2P reserves replacement ratio calculated as 2P reserves additions, excluding acquisitions and divestments, of 60 MMboe divided by FY19 reported production
of 29.4 MMboe.
2. FY19 inorganic 2P reserves replacement ratio calculated as 2P reserves additions of 42 MMboe divided by FY19 reported production of 29.4 MMboe.
3. FY19 2P reserves life calculated as 326 MMboe 2P reserves, divided by FY19 pro forma production of 26.2 MMboe. Pro forma FY19 adjusts to reflect Victorian Otway assets
at 60% for the entire FY19.
4. Western Flank Oil comprises ex PEL 91 (Beach 100%), ex PEL 92 (Beach 75%) and ex PEL 104/111 (Beach 40%). 1P reserves at 30 June 2019 are split 69% ex PEL 91, 22%
ex PEL 92, 9% ex PEL104/111. 2P reserves at 30 June 2019 are split 73% ex PEL 91, 19% ex PEL 92, 8% ex PEL104/111. Probabilistic and deterministic methodologies are used.
5. 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 at 30 June 2019 are split 97%
ex PEL 106, 3% PRL 26, 0% ex PEL91. 2P reserves at 30 June 2019 are split 98% ex PEL 106, 2% PRL 26, 0% ex PEL91. Probabilistic and deterministic methodologies are used.
6. The Cooper Basin JV comprises the South Australian Cooper Basin joint ventures where Beach equity interests are 27.68% and 33.40%, the South West Queensland joint
ventures where Beach equity interests range from 20.76% to 45.00% and Tintaburra JV where Beach equity interest is 40%. Deterministic methodology is used.
7. Other Cooper Basin includes ex PEL 513/632 (SWJV) (Beach 40%) and PRL 135 (Vanessa) (Beach 43%). Deterministic methodology is used.
8. Perth Basin comprises Waitsia (Beach 50%) and Beharra Springs (Beach 67%). Probabilistic and deterministic methodologies are used. Beharra Springs farm down from 67%
to 50% in process (refer ASX announcement #018/19, 3 July 2019).
9. Otway Basin comprises Thylacine and Geographe (Beach 60%), Halladale, Black Watch and Speculant (HBWS)(Beach 60%), LaBella (Beach 100%) and Haselgrove (Beach
100%). 1P reserves at 30 June 2019 are split 75% Thylacine and Geographe, 9% HBWS, 15% LaBella, 2% Haselgrove. 2P reserves at 30 June 2019 are split 77% Thylacine
and Geographe, 8% HBWS, 13% LaBella, 1% Haselgrove. Probabilistic and deterministic methodologies are used. LaBella farm down from 100% to 60% in process (refer ASX
announcement #016/19, 31 May 2019).
10. Bass Basin comprises BassGas producing permits (Beach 53.75%) and BassGas retention licenses (Beach 50.25%). Probabilistic and deterministic methodologies are used.
11. Taranaki Basin comprises Kupe Gas Project (Beach 50% and operator). Deterministic methodologies are used.
12. Other Cooper Basin comprises ex PEL 513/632 (SWJV) (Beach 40%), PRL 135 (Vanessa) (Beach 43%) and PRL14/18 (Flax), PRL18 (Juniper), PRL 17 (Yarrow)
(all Beach 100%) Divestment of 100% of PRL14/18 (Flax), PRL18 (Juniper), PRL 17 (Yarrow) in process (refer Red Sky Energy ASX announcement, 21 March 2019).
13. Bonaparte Basin comprises NT/RL 1 (Petrel) (Beach 5.75%).
14. Cooper Basin JV unconventional includes contingent resources classified as unconventional in the South Australian Cooper Basin joint ventures where Beach equity interests
are 27.68% and 33.40%.
ANNUAL REPORT 2019 33
ANNUAL REPORT 2019 33
BEACH ENERGY LIMITED Reserves Statement
continued
NOTES TO THE RESERVES STATEMENT
Beach’s reserves are prepared in
accordance with the 2007 Petroleum
Resources Management System (PRMS)
by, or under the supervision of Qualified
Petroleum Reserve and Resource
Evaluators (QPRRE).
The reserves statement presents estimates
of petroleum reserves and contingent
resources as at 30 June 2019 and unless
noted represents Beach’s net share.
The estimates contained in the reserves
statement are based on, and fairly
represents, the supporting information
and documentation prepared by Beach
staff who are either QPRREs or under the
supervision of QPRREs.
The reserves statement as a whole is
approved by Mr David Capon (General
Manager – Offshore Victoria, New Zealand
and Northern Territory). Mr Capon is a full
time employee of Beach and a member
of the SPE; he has a Bachelor of Science
(Honours) from the University of Adelaide
and in excess of 25 years of relevant
experience. The reserves statement has
been issued with the prior written consent
of Mr Capon as to the form and context
in which the estimates and information
are presented.
Beach prepares its reserve and resource
estimates annually in line with the Beach
reserves policy. The policy lays out the
external auditing requirements for reserves
estimates. The policy is overseen by the
Beach Reserves Committee.
Beach’s reserve estimates are prepared
using deterministic and probabilistic
methods as appropriate with the
methodology used approved by the
relevant QPRRE for the asset. An
34 34
independent audit of Beach’s reserves as
at 30 June 2019 was conducted by RISC
Advisory Pty Ltd (RISC). The audit report
states “It is RISC’s opinion that, in aggregate,
Beach’s reserve estimates are reasonable
and have been prepared in accordance with
the definitions and guidelines contained
within the Petroleum Resources Management
System (PRMS) and generally accepted
petroleum engineering and evaluation
principles as set out in the SPE Reserves
Auditing Standards”. The audit covered
75% of the 2P reserves in line with the
Beach reserves policy which requires
at least 50% of reserves to be audited.
The audit included 99% of undeveloped
reserves and 52% of developed reserves.
Contingent resource estimates have not
been audited.
Conversion factors used to evaluate oil
equivalent quantities are sales gas and
ethane 171.94 kboe per PJ, LPG 8.458
kboe per kT, condensate: 0.934 kboe
per kbbl and oil 1 kboe per kbbl. Beach’s
reserves are stated net of fuel, flare and
vent at reference points defined for each
asset. The reference point is the first
point of custody transfer after production
operations. Estimates of reserves and
resources have been aggregated by
arithmetic summation at the different
category levels, consequently Proved
reserves and Proved plus Probable plus
Possible reserves may be very conservative
or very optimistic respectively due to the
portfolio effects of arithmetic summation.
Material Reserves Change
Beach advises of a material reserves
change due to the booking of Trefoil as
undeveloped reserves in retention license
T/RL2. These reserves were transferred
from the contingent resources category.
Beach is the Operator of the field and holds
a 50.3% working interest. The other JV
parties are Mitsui and Prize Petroleum.
Gas producibility at Trefoil was
demonstrated by gas flows of greater than
10 MMscf/d from two separate zones
during cased hole production testing in
Trefoil-1. Trefoil-2 was not tested.
In FY19 Beach carried out development
studies for Trefoil. The current
development plan is to drill two near
horizontal wells to develop the gas in
the Trefoil field. The wells are expected
to utilise dry wellheads on a well head
platform near Yolla field. The platform will
be tied back to the nearby Yolla platform
(in licence T/L1 and with the same JV
parties) with a wet gas pipeline. Gas will
flow to shore via the existing Yolla gas
pipeline and be processed at the (JV
owned) Lang Lang gas plant.
Geologic models of the field were built to
determine OGIP and these OGIP estimates
were incorporated into material balance
models to generate production forecasts
for the field.
Trefoil net reserves at 30 June 2019
Classification
1P
2P
Gas
(PJ)
44
60
LPG
(kT)
105
142
Condensate
(MMbbl)
TOTAL
(MMboe)
1.3
1.7
9.7
13.1
RESERVES STATEMENT
Further development studies are being
undertaken for Trefoil. It is anticipated that
an investment decision could be taken in
early 2021 with first gas in 2023 – 2024.
Beach has undertaken cash flow analyses
for the proposed Trefoil development
using its corporate assumptions which
are commercially sensitive. The analyses
include all applicable costs to develop and
operate the field.
Marketing and commercialisation studies
for the gas and other product streams
expected to be produced from Trefoil are
underway. Gas sales agreements may
not necessarily be in place prior to an
investment decision but the depth of the
Eastern Australia gas market means that
this is not a significant risk factor.
The Trefoil development is located within
Commonwealth waters and is subject to
the necessary regulatory approvals from
the National Offshore Petroleum Safety
and Environmental Management Authority
(NOPSEMA). Beach is progressing the
necessary approvals.
Otway Gas Plant
ANNUAL REPORT 2019 35
ANNUAL REPORT 2019 35
BEACH ENERGY LIMITED Sustainability
OUR PEOPLE
The safety of our people is
our number one priority and
we are committed to developing
a talented workforce and a
high-performance culture.
HSE Performance
• Our safest year on record with a
3.4 TRIFR.
• Beach was a finalist in the Award
for Company Safety at the 2019
APPEA Awards.
• Used innovative solutions such as
drones to identify and prioritise risk
areas in our offshore facilities.
• Completed third occupational hygiene
assessment.
• Developed heat stress guidelines for
field operations.
Workforce development and retention
• Delivered a new Corporate Induction to
reflect the expanded business
• Commenced a Geosciences and
Engineering Competency Framework
• Continued developing our leaders
through expanded leadership training –
Building Our Leaders and Leadership for
High Performance
• New package of Staff Benefits rolled out
including Employee Referral Program,
Share Plan and Salary Packaging
Options
• Conducted employee engagement
survey
• Completed roll-out of a number of
training courses, including training
on discrimination, equal opportunity,
sexual harassment and bullying.
OUR
SAFEST
YEAR ON
RECORD
36 36
Cooper Basin,
South Australia
FY19
Highlights
FY19 was both Beach’s safest
year on record and our best
environmental performance
on record
Otway Basin, Victoria
SPREAD 1
CLIMATE CHANGE
Beach recognises that climate
change is one of the global
challenges of this century.
As a member of the energy
industry we have a role to play
in managing carbon emissions.
We believe that a variety of energy
sources are required to meet global
energy demand. We also support
global efforts to reduce climate change
through the implementation of clear
and stable climate change policies and
market mechanisms.
SPREAD 1
SUSTAINABILITY
Task Force on Climate Related Financial
Disclosures (TCFD)
Following review of Beach’s climate
related disclosures against the TCFD
recommendations last year, we
undertook a number of first steps to
help us improve the management of
disclosure around climate change.
These are:
• Updated governance documents to
record oversight of climate-related
matters;
• Developed and published a Climate
Change Policy;
• Conducted scenario-based risk
analysis using widely accepted
climate-related scenarios;
• Currently undertaking a review of
our material climate related risks and
opportunities.
Environmental Performance:
• Our best environmental performance
on record with 0.07kl crude spills
down 99.9% since FY15.
• Offset 579 hectares of land, through
financial contributions to Witchelina
Station reserve, which is run by Nature
Foundation SA.
• Partnership with Heytesbury &
District Landcare Network to help
bolster local efforts to try and control
Coastal Wattle in the Bay of Islands
National Park, Victoria.
• Kupe receives ‘high performance’
endorsement for environmental
performance from Taranaki Regional
Council.
• Reduced paper usage through
adoption of Paper-Lite initiative.
• Developed a broad rehabilitation
strategy for Cooper Basin operations.
OUR BEST
ENVIRONMENTAL
YEAR ON
RECORD
ANNUAL REPORT 2019 37
ANNUAL REPORT 2019 37
OUR CLIMATE CHANGE POLICY COMMITMENTBeach Energy is committed to:• Identifying, managing and mitigating material climate risks to business;• Measuring and reporting carbon emissions as required by the regulatory requirements of the regions we operate in;• Ensuring that our practices and procedures align and integrate climate risks into project decision-making;• Where economically practicable, integrate low emissions technologies in our operations, and identify opportunities for carbon emission reduction;• Evaluating the resilience of our portfolio and investment decisions to potential changes in global climate policy and changes in climate; and• Setting targets to encourage innovation and drive reductions in our carbon emissions as well as modelling an internal carbon price to help guide our business decisions.BEACH ENERGY LIMITED Sustainability
continued
Community Partnerships:
Beach announced a number of key
community partnerships in FY19, including:
• Major sponsorship of the Royal Flying
Doctor Service (SA/NT).
• Major sponsorship of Port Campbell
Surf Life Saving Club.
• Sponsorship of key community wellness
program “Its Time to Talk Taranaki”,
to aid community mental health and
well-being.
• Partnership with SA Museum to deliver
Fossil Fest, resulting in the Museum’s
busiest day in its 150 year history.
• Partnership with the Taranaki Community
Rugby Trust to support the development
of grassroots rugby in the region.
A warm
welcome from
Ngaruahine iwi
Thursday 19 July 2018 was an important
day for Beach Energy, as Ngaruahine iwi,
the traditional custodians of the land,
welcomed Beach executives to the Kupe
Production Station in Taranaki.
A traditional Maori ‘pōwhiri’ welcome
was performed to signify the end of
the relationship with Origin Energy and
mark the beginning of a new relationship
with Beach.
For Beach’s executive team, it was an
honour to meet with the local elders,
learn more about their culture and to
provide some insight into our operations.
OUR COMMUNITY
Beach’s emphasis is to
become a trusted, respected
and accepted member of
the communities in which
we operate. We do this
by demonstrating to local
communities the Beach values,
our commitment to safe
operations, respect for each
other, the communities and
environment.
Indigenous Relationships
Our relationships with local indigenous
groups are highly valued by the company.
We proactively keep indigenous
stakeholders informed of all relevant
activities within their country or tribal
area. We seek clarification of our
understanding of cultural values and
traditions and proactively collaborate
creating enhanced understanding and
strengthening relationships.
Community and Landowner
Our engagement is proactive and
transparent; acknowledging issues,
sharing information, actively listening
and delivering upon agreed commitments
that deliver mutual benefit aligned
to community aspirations and
business outcomes.
Relationships with local landowners and
wider community are fostered by direct
consultation, understanding community
views and concerns, providing adequate
notice of activity, observation of protocols,
and delivery of agreed commitments.
Announcing Port Campbell
Surf Life Saving Club Major
Sponsorship
38 38
SUSTAINABILITY
CONSULTATION ACTIVITIES
Beach conducted a number of
community and stakeholder
engagement activities in FY19:
Victoria
• Black Watch extended reach drilling
campaign in South West Victoria
• Enterprise Exploration extended reach drilling
project near Port Campbell
• Otway offshore drilling campaign including
seabed assessments.
South Australia
• Dombey-1 drilling campaign
• Haselgrove-4 drilling campaign
• Katnook Gas Plant renewal
• Haselgrove-3 connection to Katnook Gas
plant
• Exploration and drilling in the Cooper basin.
Western Australia
• Beharra Spring Deep drill campaign
• Trieste seismic survey.
New Zealand
• Kupe Phase 2 compressor upgrade
• Kupe Offshore Spill Response Plan review
• Kupe shutdown
• Kupe subsea monitoring.
FOR MORE INFORMATION:
See the 2019 Beach Energy
Sustainability Report, to be released
later this year.
Being welcomed by
the Ngaruahine iwi
BEACH ANNOUNCES MAJOR
SPONSORSHIP OF ROYAL FLYING
DOCTOR SERVICE
The Royal Flying Doctor Service Central
Operations (serving SA/NT) has
unveiled a brand new ‘flying intensive
care unit’ and announced a new major
sponsor in Beach Energy Limited.
In recognition of the three-year bespoke sponsorship,
the new medically-equipped Pilatus PC12 NG aircraft
will be badged with the Beach logo. The $7 million
aircraft, VH-JDN (Juliet-Delta-November), is one of
71 RFDS aircraft located across the country, many
of which serving the outback and rural communities
where Beach staff, contractors and community
stakeholders live, work and play.
RFDS Major Sponsorship
ANNUAL REPORT 2019 39
ANNUAL REPORT 2019 39
BEACH ENERGY LIMITED 1. 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 has
expertise and experience in the execution
of large transactions and in corporate
activity regulated by the Corporations Act
and ASX Limited. Mr Davis has worked in
the oil and gas industry as an advisor and
director for over 25 years.
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 23 November 2018.
2. Matthew Kay
MANAGING DIRECTOR & CHIEF
EXECUTIVE OFFICER
BEc, MBA, FCPA, GAICD
Mr Kay joined Beach in May 2016 as Chief
Executive Officer. Mr Kay has over 25
years’ experience in oil and gas and prior to
joining Beach, 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
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.
Mr Kay was appointed to the Board on
25 February 2019.
3. 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 was formerly the Chancellor of Curtin
University and is currently Chair 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 was 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.
4. 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 director of
the Global Institute of Carbon Capture
and Storage. He was formerly the
non-executive chairman of Sino Gas
and Energy Holdings until 2018 and 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 and membership of the Audit
Committee. He was appointed by the
Board on 1 March 2016, last having been
elected to the Board on 10 November 2016.
Board
of Directors
2.
4.
6.
8.
1.
3.
5.
7.
9.
40 40
5. Joycelyn Morton
INDEPENDENT NON-EXECUTIVE
DIRECTOR
BEc, FCA, FCPA, FIPA, FCIS, FAICD
Ms Morton has more than 39 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 membership of the Audit
Committee. She was appointed a non-
executive director of Beach Energy Limited
on 21 February 2018 and then elected to
the Board on 23 November 2018.
6. 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 23 November 2018.
7. 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 member 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.
8. 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
BOARD OF DIRECTORS
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 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.
9. Sally-Anne Layman
INDEPENDENT NON-EXECUTIVE
DIRECTOR
B Eng (Mining) Hon, B Com, CPA, MAICD
Sally-Anne Layman is a company director
with 25 years’ experience in the resources
sector and financial markets, including 14
years with Macquarie Group where she
was a division director and Joint Head of
the Perth Office for the Metals, Mining &
Agriculture Division.
Prior to moving into finance, Ms Layman
undertook various mining roles including
production engineer at Great Central Mines
and mining engineer at Mount Isa Mines.
Ms Layman holds a WA First Class Mine
Manager’s Certificate of Competency.
Ms Layman is also a Non-Executive
Director of Perseus Mining Ltd, Imdex Ltd
and Pilbara Minerals Ltd.
Ms Layman holds a Bachelor of
Engineering, Mining from Curtin University
and a Bachelor of Commerce from the
University of Southern Queensland.
Ms Layman is a Certified Practicing
Accountant and worked in this capacity at
Western Metals and Normandy Yandal.
Ms Layman was appointed to the Board
on 25 February 2019.
ANNUAL REPORT 2019 41
ANNUAL REPORT 2019 41
BEACH ENERGY LIMITED FULL YEAR REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Directors’ Report
Auditor’s Independence Declaration
2019 Remuneration in Brief
(Unaudited)
Remuneration Report (Audited)
Directors’ Declaration
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 from contracts with customers and other income
3. Expenses
4. Employee benefits
5. Taxation
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. Provisions
13. Commitments for expenditure
Financial and risk management
14. Finances and borrowings
15. Cash flow reconciliation
16. Financial risk management
Equity and group structure
17. Contributed equity
18. Reserves
19. Dividends
20. Subsidiaries
21. Deed of cross guarantee
22. Parent entity financial information
23. Related party disclosures
24. Disposal group held for sale
25. Business combination
Other information
26. Contingent liabilities
27. Remuneration of auditors
28. Subsequent events
Independent Auditor’s Report
Glossary of Terms
Schedule of Tenements
Shareholder Information
Corporate Information & Directory
42 42
43
56
57
58
73
74
75
76
77
78
82
82
83
84
85
87
90
91
91
91
92
94
95
96
98
99
99
100
101
105
105
106
106
106
108
110
111
111
112
114
114
115
115
116
123
125
130
132
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Your directors present their report for Beach Energy Limited (Beach or Company) on the consolidated accounts for the financial year
ended 30 June 2019. 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 2019 and up to the date of this report are:
Surname
Davis
Beckett
Bainbridge
Kay
Layman
Moore
Morton
Richards
Stokes
McKerlie
Other Names
Glenn Stuart
Colin David
Philip James
Matthew Vincent
Sally-Anne Georgina
Peter Stanley
Joycelyn Cheryl
Richard Joseph
Ryan Kerry
James David
Position
Independent non-executive Chairman
Independent non-executive Deputy Chairman
Independent non-executive director
Managing director (3)
Independent non-executive director (2)
Independent non-executive director
Independent non-executive director
Non-executive director
Non-executive director
Independent non-executive director (1)
(1) Retired on 23 November 2018
(2) Appointed as a non-executive director on 25 February 2019
(3) Appointed as managing director on 25 February 2019
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
G S Davis
C D Beckett
P J Bainbridge
M V Kay
S G Layman
P S Moore
J C Morton
R J Richards(3)
R K Stokes(3)
Shares
Rights
218,226 (2)
77,694 (1)
118,090 (2)
2,614,104 (1)
–
44,200 (2)
50,000 (1)(2)
229,443 (2)
–
–
–
–
2,786,058 (1)
–
–
–
–
–
(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 28.57% 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.
ANNUAL REPORT 2019 43
ANNUAL REPORT 2019 43
FULL YEAR REPORTBEACH ENERGY LIMITED Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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.
Operating and Financial Review
A review of operations of Beach Energy during the financial year are set out on pages 15–29.
Financial results from FY19 are summarised below:
• Group profit attributable to equity holders of Beach was $577.3 million (FY18: $198.8 million).
• Sales revenue was up 54% from FY18 to $1,925 million due to higher sales volumes with a full year contribution from the Lattice
assets as well as higher prices.
• Cost of sales were up 56% from FY18 to $1,207 million, mainly as a result of a full year’s ownership of the Lattice assets with higher
operating costs, royalties, depreciation and third party purchases, partly offset by lower inventory.
• A net profit after tax of $577 million was reported due to the strong underlying operating performance.
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
2019
2018
Change %
MMboe
MMboe
$m
$m
$m
$m
$m
$m
$m
$m
cps
cps
cps
cps
$m
$m
$m
$m
29.4
31.2
(447.0)
1,925.4
2,077.7
(1,207.4)
870.3
41.8
577.3
560.2
2.00
1.00
25.35
24.59
19.0
20.1
(288.5)
1,250.8
1,267.4
(773.8)
493.6
24.1
198.8
301.5
2.00
1.00
9.16
13.89
1,038.2
(187.6)
662.9
(1,730.7)
2,374.4
171.9
1,838.0
311.2
55%
55%
(55%)
54%
64%
(56%)
76%
73%
190%
86%
0%
0%
177%
77%
57%
89%
29%
(45%)
* Underlying results in the table above are categorised as non-IFRS financial information provided to assist readers to better understand the financial performance of the
underlying operating business. They have not been subject to audit or review by Beach’s external auditors. Please refer to the table on page 46 for a reconciliation of this
information to the financial report.
44 44
Revenue
Higher oil and gas sales volumes driven by a full year contribution from the Lattice assets, increased third party sales and a lower
A$/US$ exchange rate in FY19 contributed to a 54% increase in sales revenue to $1,925 million ($1,251 million in FY18). Sales volumes of
31.2 MMboe were 55% higher than FY18 due to a full year contribution from the Lattice assets and higher third party volumes. The average
realised oil price increased to A$102/bbl, up A$9/bbl from FY18, primarily due to a decrease in the average A$/US$ exchange rate.
Sales Revenue Comparison ($m)
2000
529.1
19.1
25.2
48.8
90.6
1,925.4
1500
1000
500
Oil and
liquids prices
Gas/ethane
prices
Third party
sales
FX rates
1,250.8
Volume/
mix
US$/boe
FY18 $70
FY19 $69
A$/GJ
FY18 $6.57
FY19 $6.81
A$/US$
FY18 $0.775
FY19 $0.715
54%
$674.6 million
total increase
0
FY18
Average price
A$62.26/boe
FY19
Average price
A$61.76/boe
Gross Profit
Gross profit for the full year of $870 million (FY18 $494 million) was up 76%. The increase in gross profit was primarily due to higher
sales revenue driven by a full year contribution from the Lattice assets partly offset by higher total cost of sales which were up 56% from
FY18 to $1,207 million. The increase in cost of sales is principally due to a full year contribution from the Lattice assets with higher cash
production costs ($168 million), higher depreciation and amortisation ($210 million) and higher third party purchases ($64 million),
partly offset by a decrease in inventory charges ($8 million). Cash production costs were up $168 million (45%), reflecting higher
operating costs and higher royalties from the increase in production and prices. Higher depreciation and amortisation charges were
mainly due to increases in production driven by a full year contribution from the Lattice assets. Third party oil and gas purchases
increased due to higher volumes. The decrease in inventory charges primarily reflects timing of shipments and drawdown of gas
from storage. Key movements in gross profit are summarised below:
Gross Profit Comparison ($m)
1500
1200
900
600
493.6
300
0
FY18
674.6
Sales
revenue
135.7
8.4
63.5
168.4
Other
revenue
Inventory
Third party
purchases
210.1
Cash production
costs
870.3
Depreciation
76%
$376.7 million
total increase
FY19
ANNUAL REPORT 2019 45
ANNUAL REPORT 2019 45
FULL YEAR REPORTBEACH ENERGY LIMITED Net profit after tax (NPAT)
Other income of $42 million was up $18 million from FY18 due to the unrealised hedging gains and higher gains on the disposal of various
joint venture and other interests.
Other expenses for FY19 of $44 million was $154 million lower than the prior year which included impairment expenses of $88 million
and acquisition and integration costs of $50 million.
The reported net profit after tax of $577 million is $379 million higher than FY18, primarily due to the strong operating performance with
a full year contribution from the Lattice assets.
Underlying NPAT
By adjusting FY19 NPAT to exclude asset disposals (as summarised below), underlying NPAT was $560.2 million. This represents an
86% increase on FY18, mainly due to a full year contribution from the Lattice assets.
Comparison of underlying profit
Net profit after tax
Adjusted for:
Acquisition, integration and debt cancellation costs
Gain on asset disposals
Marked to market hedging movements
Impairment (reversal)/loss of assets
Tax impact of above changes
Underlying net profit after tax
FY19
$ million
FY18
$ million
Movement
from PCP
$ million
577.3
198.8
378.5
190%
–
(20.5)
–
–
3.4
560.2
51.4
(20.3)
13.2
88.3
(29.9)
301.5
(51.4)
(0.2)
(13.2)
(88.3)
33.3
258.7
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 14 to the financial statements.
Underlying Net Profit After Tax Comparison ($m)
376.7
19.9
22.8
Other
expenses
and revenue
Net financing
costs
115.1
Tax
560.2
301.5
Gross profit
86%
$258.7 million
total increase
FY18
FY19
800
700
600
500
400
300
200
100
0
46 46
Directors’ ReportFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Position
Assets
Total assets decreased by $163 million to $3,914 million.
Cash balances decreased by $139 million to $172 million,
primarily due to repayment of the remaining debt facility
($950 million), capital expenditure ($479 million) and dividends
paid ($46 million) partly offset by cash flow from operations of
$1,038 million and proceeds on the sale of assets ($284 million).
Receivables increased by $11 million primarily due to higher joint
venture receivables. Inventories also increased $5 million due to
higher stores inventory partly offset by lower product inventory.
Derivative financial instruments assets fell by $19 million to nil
with all hedging maturing during the period. Current contract
assets increased by $14 million related to the Lattice acquisition.
Assets held for sale have decreased by $14 million with the sale of
the corporate head office building partly offset by the recognition
of the Perth Basin assets as held for sale as at 30 June 2019.
Fixed assets, petroleum and exploration assets decreased by
$86 million. This comprised adjustments to the acquisition of
Lattice and Toyota assets of $180 million, other acquisitions of
$3 million, capital expenditure of $478 million, capitalised interest
of $22 million, increases in restoration assets of $161 million
and foreign currency changes of $8 million partly offset by
amortisation and depreciation of $527 million, disposals of
$404 million and reclassifications of assets to held for sale
of $7 million.
Goodwill of $57 million was recognised on the Lattice and
Toyota acquisitions.
Non-current contract assets increased by $60 million related to
the Lattice acquisition.
Other assets increased by $21 million due to higher prepayments
and reclassification of unamortised debt establishment fees on the
remaining undrawn debt facility.
Liabilities
Total liabilities decreased by $699 million to $1,540 million, mainly
due to repayment of borrowings of $926 million and a decrease
in derivative financial instruments liabilities of $47 million partly
offset by increased contract assets of $103 million related to
the Lattice acquisition, restoration provisions of $68 million, an
increase in tax liabilities of $91 million and a $20 million increase
in payables.
Equity
Equity increased by $536 million, mainly due to net profit after tax
of $577 million partly offset by dividends paid during the year of
$46 million.
Dividends
During the financial year the Company paid an FY18 fully franked
final dividend of 1.0 cent per share as well as an interim FY19 fully
franked dividend of 1.0 cent per share. The Company will also pay
an FY19 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.
Funding and capital management
As at 30 June 2019, Beach held cash and cash equivalents
of $172 million. On 23 November 2017, Beach executed 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). During the period, Beach voluntarily
prepaid and cancelled the Facility A and Facility B commitments
of $950 million. As at 30 June 2019, Facility C remained fully
undrawn, with $61.9 million of Facility D being utilised by way
of bank guarantees.
Beach anticipates that its current funding to be adequate for
capital expenditure anticipated for FY20.
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.
ANNUAL REPORT 2019 47
ANNUAL REPORT 2019 47
FULL YEAR REPORTBEACH ENERGY LIMITED 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.
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.
Ability to access funding
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.
If cash flows decrease or Beach is unable to access necessary
financing, this may result in postponement of or reduction in
planned capital expenditure, relinquishment of rights in relation
to assets, or an inability to take advantage of opportunities or
otherwise respond to market conditions. Any of these outcomes
could have a material adverse effect on Beach’s ability to expand
its business and/or maintain operations at current levels, which
in turn could have a material adverse effect on Beach’s business,
financial condition and operations.
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.
48 48
Directors’ ReportFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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, climatic
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 robust systems to prevent
such attacks and to optimise response should one occur.
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 health, safety and environment management
system to identify and manage risks in this area. Insurance
policies, standard operating procedures, contractor management
processes and facility design and integrity management systems,
amongst other things, are important elements of the system that
supports mitigation of 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 2019 49
ANNUAL REPORT 2019 49
FULL YEAR REPORTBEACH ENERGY LIMITED 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 cent per share on 30 September 2019.
The record date for entitlement to this dividend is 30 August 2019. 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 2019 and will be recognised in subsequent Financial Statements.
The details in relation to dividends paid during the reporting period are set out below:
Dividend
FY18 Final
FY19 Interim
Record Date
Date of payment
Cents per share
Total Dividends
31 August 2018
28 February 2019
28 September 2018
29 March 2019
1.0
1.0
$22.8 million
$22.8 million
For Australian income tax purposes, all dividends were fully franked and were not sourced from foreign income.
50 50
Directors’ ReportFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Share options and rights
Beach does not have any options on issue at the end of financial year and has not issued any during FY19.
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 6 December 2018, Beach issued 437,928 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 2019 and 1 July 2020.
On 14 December 2018, Beach also issued 2,328,932 Long Term Incentive (LTI) unlisted performance rights under the Executive Incentive
Plan (EIP). These performance rights, which expire on 30 November 2023, are exercisable for nil consideration and are not exercisable
before 1 December 2021.
Rights
2015 LTI unlisted rights
Issue 1 December 2015
2015 LTI 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
2017 STI unlisted rights
Issue 6 December 2018
2018 LTI unlisted rights
Issue 14 December 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
403,226
815,401
1,604,006
275,843
920,521
1,641,429
963,475
–
–
–
–
–
–
–
–
–
437,928
2,328,932
(403,226)
(815,401)
–
–
(460,259)
–
–
–
–
6,623,901
2,766,860
(1,678,886)
–
–
–
–
–
–
–
–
–
–
–
–
1,604,006
275,843
460,262
1,641,429
963,475
437,928
2,328,932
7,711,875
ANNUAL REPORT 2019 51
ANNUAL REPORT 2019 51
FULL YEAR REPORTBEACH ENERGY LIMITED 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:
Glenn Stuart 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 has expertise and experience
in the execution of large transactions and in corporate activity
regulated by the Corporations Act and ASX Limited. Mr Davis has
worked in the oil and gas industry as an advisor and director for
over 25 years.
Current and former listed company directorships in the last 3 years
Mr Davis is a former director of ASX listed company Auteco
Minerals Limited (previously called Monax Mining Limited)
(from 2004 to November 2018).
Responsibilities
His special responsibilities include Chairmanship of the Board and
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 23 November 2018.
Colin David Beckett
Independent non-executive Deputy Chairman – FIEA,
MICE, GAICD
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 was formerly the Chancellor of Curtin University and
is currently 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.
Philip James Bainbridge
Independent non-executive director – BSc (Hons)
Mechanical Engineering, MAICD
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 director of the Global
Institute of Carbon Capture and Storage. He was formerly the
non-executive chairman of Sino Gas and Energy Holdings until
2018 and 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 and
then elected to the Board on 10 November 2016.
Matthew Kay
Managing director & Chief executive officer – BEc, MBA,
FCPA, GAICD
Experience and expertise
Mr Kay joined Beach in May 2016 as Chief Executive Officer.
Mr Kay has over 25 years’ experience in energy and resources
and prior to joining Beach, 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 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.
Current and former listed company directorships in the last 3 years
Nil
Current and former listed company directorships in the last 3 years
Nil
Responsibilities
Managing Director & Chief Executive Officer
Date of appointment
Mr Kay was appointed managing director of Beach Energy Limited
on 25 February 2019.
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 and last
re-elected to the Board on 23 November 2017.
52 52
Directors’ ReportFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Sally-Anne Layman
Independent non-executive director – B Eng (Mining) Hon,
B Com, CPA, MAICD
Experience and expertise
Sally-Anne Layman is a company director with 25 years’ experience
in the resources sector and financial markets, including 14 years
with Macquarie Group where she was a division director and Joint
Head of the Perth Office for the Metals, Mining & Agriculture
Division. Prior to moving into finance, Ms Layman undertook various
mining roles including production engineer at Great Central Mines
and mining engineer at Mount Isa Mines. Ms Layman holds a WA
First Class Mine Manager’s Certificate of Competency.
Ms Layman holds a Bachelor of Engineering, Mining from Curtin
University and a Bachelor of Commerce from the University
of Southern Queensland. Ms Layman is a Certified Practicing
Accountant and worked in this capacity at Western Metals and
Normandy Yandal.
Current and former listed company directorships in the last 3 years
Ms Layman is also on the board of Perseus Mining Ltd (since
September 2017), Imdex Ltd (since February 2017) and Pilbara
Minerals Ltd (since April 2018) and was previously on the board
of Gascoyne Resources Ltd (from June 2017 until May 2019).
Responsibilities
Her special responsibilities include Chairmanship of the Audit
Committee.
Date of appointment
Ms Layman was appointed to the Board on 25 February 2019.
Peter Stanley Moore
Independent non-executive director – PhD, BSc (Hons),
MBA, GAICD
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 Carnarvon
Petroleum Ltd (since 2015) and was previously a non-executive
director of Central Petroleum Ltd (from 2014 to November 2018).
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.
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 (since
March 2015). 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 (since 2011 to 2018) and Noni B
Limited (since May 2009 to February 2015) and a non-executive
director of Crane Group Limited (since October 2010 to April 2011),
Count Financial Limited (since 2006 to 2011) and InvoCare Limited
(since August 2015 to May 2018).
Responsibilities
Her special responsibilities include membership of the
Audit Committee.
Date of appointment
Ms Morton was appointed a non-executive director of
Beach Energy Limited on 21 February 2018 and then elected to
the Board on 23 November 2018.
Richard Joseph Richards
Non-executive director – BComs/Law (Hons), LLM,
MAppFin, CA, Admitted Solicitor
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.
Date of appointment
Mr Richards was appointed to the Board on 4 February 2017 and
then elected to the Board on 23 November 2017.
ANNUAL REPORT 2019 53
ANNUAL REPORT 2019 53
FULL YEAR REPORTBEACH ENERGY LIMITED 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 28.57% 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.
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 23 November 2018.
The names of the directors of Beach who held office during the
financial year and are no longer on the Board are:
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 included membership of the Audit
Committee.
Date of appointment/resignation
Mr McKerlie was appointed to the Board on 1 March 2016 and
then elected to the Board on 10 November 2016. He retired on
23 November 2018.
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:
Name
G S Davis
C D Beckett
P J Bainbridge
M V Kay
S G Layman
P S Moore
J C Morton
R J Richards
R K Stokes
J D McKerlie
Directors’
Meetings
Audit Committee Meetings
Remuneration and
Nomination Committee
Meetings
Risk, Corporate Governance
and Sustainability
Committee Meetings
Held (1)
Attended
Held (1)
Attended
Held (1)
Attended
Held (1)
Attended
12
12
12
4
4
12
12
12
12
5
12
12
11
4
4
12
12
12
12
0
–
–
7
–
–
–
7
7
–
2
–
–
7
–
–
–
7
7
–
1
8
8
–
–
–
8
–
–
8
–
8
8
–
–
–
8
–
–
8
–
–
4
4
–
–
4
–
–
–
–
–
4
4
–
–
4
–
–
–
–
(1) Number of Meetings held during the time that the director was appointed to the Board or 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
S G Layman
P J Bainbridge
C D Beckett
Members
J C Morton, R J Richards
C D Beckett, P S Moore
G S Davis, R K Stokes, P S Moore
54 54
Directors’ ReportFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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.
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.
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 27 to the financial statements.
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.
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.
Matters arising subsequent to the end of the
financial year
On 3 July 2019, Beach announced that it has executed agreements
with AWE (Beharra Springs) Pty Ltd, a related body corporate of
Mitsui E&P Australia (MEPAU), to move to 50:50 ownership of
production licences L11 and L22 (Beharra Springs), exploration
permit EP 320 and pipeline licence PL 18 in the Perth Basin. The
previous ownership structure for these permits was Beach 67%
and MEPAU 33%. Beach will retain operatorship of the permits.
The transaction has an effective date of 1 January 2019 and is
expected to be completed during Q1 FY20, subject to satisfaction
of various conditions including regulatory approval.
Other than the matters described above, there has not arisen
in the interval between 30 June 2019 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.
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, 19 August 2019
ANNUAL REPORT 2019 55
ANNUAL REPORT 2019 55
FULL YEAR REPORTBEACH ENERGY LIMITED Auditors’ Independence Declaration
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 the financial report of Beach Energy Limited for the financial year
ended 30 June 2019, 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
19 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
56 56
2019 Remuneration in Brief (Unaudited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
FY19 remuneration outcomes at a glance
Fixed Remuneration
Short Term Incentive (STI)
Long Term Incentive (LTI)
BENCHMARK INCREASES FOR
SENIOR EXECUTIVES
STI AWARDED
LTI PARTIALLY VESTED
Non-executive directors
NO BASE FEE INCREASES
2018 AGM Remuneration
Report
98.7% ‘YES VOTE’
Total fixed remuneration (TFR) increased from the previous year
according to industry benchmarks.
The board awarded an STI to senior executives.
The 2015 LTI performance rights fully vested following achievement
of the performance condition.
Fees payable to the Chair of the Risk, Corporate Governance and
Sustainability Committee increased from $15,000 to $25,000. Fees
payable to members of that Committee increased from $10,000 to
$15,000. The increases made fees for each Board Committee the
same. Otherwise there were no changes to Board fees for FY19.
Beach received more than 98% of ‘yes’ votes on a poll to adopt
its Remuneration Report for the 2018 financial year. No specific
feedback on Beach’s remuneration practices was received at the
2018 annual general meeting.
Remuneration to executive key management personnel in FY19
A summary of the audited cost to the Company of executive key management personnel (KMP) remuneration is provided in Table 8.
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 FY19. It is not audited.
Table 1: Remuneration to executive key management personnel (unaudited)
Name
TFR
M V Kay
Managing Director and Chief Executive Officer
M Engelbrecht
Chief Financial Officer
D Summers
Chief Operating Officer
G Barker
Group Executive Development
L Marshall
Group Executive Corporate Strategy &
Commercial
J Schrull
Group Executive Exploration & Appraisal
Total
Salary
$
Super
$
STI cash bonus
$
1,176,357
25,000
580,447
521,262
25,000
114,293
669,670
20,531
144,419
446,343
25,000
99,819
Other(1)
$
–
–
–
–
452,050
25,000
99,819
100,000
461,593
3,727,275
20,531
141,062
100,881
1,139,678
–
100,000
Termination
$
Total Cash
$
–
–
–
–
–
–
–
1,781,804
660,555
834,620
571,162
676,869
583,005
5,108,015
(1) Other remuneration includes allowances paid under the terms and conditions of employment such as retention allowances.
ANNUAL REPORT 2019 57
ANNUAL REPORT 2019 57
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 2019. 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 FY19
Name
Position
Period as KMP during the year
Executive KMP
M V Kay
M Engelbrecht
D Summers
G Barker
L Marshall
J Schrull
Non-executive Directors
G S Davis
P J Bainbridge
C D Beckett
P S Moore
J C Morton
R J Richards
R K Stokes
S G Layman
Former Non-executive Directors
J D McKerlie
All of FY19
Managing Director & Chief Executive Officer (CEO)
All of FY19
Chief Financial Officer
All of FY19
Chief Operating Officer
Group Executive Development
All of FY19
Group Executive Corporate Strategy and Commercial All of FY19
All of FY19
Group Executive Exploration and Appraisal
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 FY19
All of FY19
All of FY19
All of FY19
All of FY19
All of FY19
All of FY19
Appointed 25 February 2019
Non-executive Director
Ceased to be a Director on 23 November 2018
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 Managing Director & 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.
58 58
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 Managing Director & CEO about executive remuneration. The Managing
Director & CEO 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 term 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 FY18 and FY19 are detailed in Table 8.
Table 3: Shareholder wealth indicators FY15 – FY19
Total revenue
Net profit/(loss) after tax
Underlying net profit after tax
Share price at year-end
Dividends declared
Reserves
Production
FY15
FY16
FY17
FY18
FY19
$735.5m
($514.1m)
$90.7m
105.0 cents
1.50 cents
74 MMboe
9.1 MMboe
$564.6m
($588.8m)
$35.7m
61.0 cents
0.50 cents
70 MMboe
9.7 MMboe
$665.7m
$387.5m
$161.7m
57.5 cents
2.00 cents
75 MMboe
10.6 MMboe
$1,267.4m
$2,077.7m
$198.8m
$577.3m
$301.5m
$560.2m
175.5 cents
198.5 cents
2.00 cents
2.00 cents
313 MMboe
326 MMboe
19.0 MMboe 29.4 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.
ANNUAL REPORT 2019 59
ANNUAL REPORT 2019 59
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 CEO has the highest level of ‘at risk’
remuneration reflecting the greater level of responsibility of this role.
Table 4 sets out the relative proportions of the three elements of the executives KMP’s total remuneration packages for FY18 and FY19.
Table 4: Remuneration mix (1)
Position
CEO
2019
2018
Other Executive KMP
2019
2018
Performance based
remuneration
Fixed
Remuneration
%
STI %
LTI %
Total ‘at risk’
%
34
34
51
51
33
33
23
23
33
33
26
26
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.
Fixed remuneration
What is fixed remuneration? 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.
How is fixed remuneration
reviewed?
Fixed remuneration for the year
Total fixed remuneration (TFR) of KMP are provided in Table 1 and Table 8. Table 8 reports on the remuneration for KMP as required
under the Corporations Act. Table 1 shows the actual 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.
60 60
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.
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.
Incentive payments are based on a percentage of a senior executive’s fixed remuneration.
The CEO can earn up to a maximum of 100% of his fixed remuneration.
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 CEOs
recommendation. The Board assesses the achievement of the KPIs for the CEO.
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.
Table 5: Two-tiered test
Measures
One year Relative Total Shareholder Return against the ASX 200
Energy Index for the Performance Period
Return on capital (1)
Green
Yellow
Red
>Index return =Index return 7%
<7%
Are there different
performance levels?
What is the value of the STI
award that can be earned?
How are the performance
conditions assessed?
Is there a threshold level of
performance or hurdle
before an STI is paid?
(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)
What happens if an STI
is awarded?
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 October.
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 2019 61
ANNUAL REPORT 2019 61
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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
One 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
Both results fell in the green band.
FY19 Hurdle
Measure
14.7%
27.4%
The percentage of the maximum STI that will be paid or forfeited for the period for each executive KMP was as follows (paid/forfeited):
Mr Kay 97%/3%, Mr Engelbrecht 93%/7%, Ms Summers 93%/7%, Mr Marshall 93%/7%, Mr Barker 93%/7%, Mr Schrull 93%/7%.
The STI awards made reflect Beach’s strong performance for FY19, including:
• The achievement of full year production at the high end of guidance and exceeding stretch targets.
• 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 FY19 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.
Reserves replacement – 15% Replacing reserves is fundamental to Beach’s longer
term financial sustainability.
Personal safety – 5%
Process safety – 5%
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.
Environment – 5%
Beach strives to reduce the environmental impact of
its activities.
Statutory NPAT – 15%
Statutory NPAT reflects Beach’s earning
performance. Stretch performance is achieved
through strong sales revenue and cost reduction.
Beach’s full year production was 29.4 MMboe.
Score – stretch met.
Beach’s 2P reserves increased by 60 MMboe
(excluding production and divestments) to
326 MMboe.
Score – stretch met.
Beach achieved a total recordable injury frequency
rate (TRIFR) of 3.4.
Score – threshold met.
Beach did not record any Loss of Primary
Containment events during the year.
Score – stretch met.
Beach achieved environmental targets for FY19.
Score – stretch met.
In FY19 Beach delivered NPAT of $577 million.
Score – stretch met.
STI performance rights issued in 2017 and 2018 to senior executives converted automatically to shares because they remained employed
by the Company on 1 July 2019. A total of 679,224 shares were issued.
STI performance rights issued or in operation in FY19
The fair value of services received in return for STI rights (see Table 13) 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.
62 62
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).
How does the LTI link to
Beach’s key purpose?
Beach offers LTIs to senior executives at the discretion of the Board.
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 investments
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?
Is shareholders equity
diluted when shares
are issued on vesting of
performance rights or
exercise of options?
What happens to LTI
performance rights on a
change of control?
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.
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 2019,
shareholders equity would have diluted by 0.34% (FY18 – 0.29%). 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.
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.
ANNUAL REPORT 2019 63
ANNUAL REPORT 2019 63
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Table 7: Details of LTI equity awards issued, in operation or tested during the year
Details
2015, 2016, 2017 and 2018 Performance Rights including CEO 2015 LTI performance rights
Type of grant
Calculation of grant limits for senior
executives
Grant date
Issue price of performance rights
Performance period
Note: the date immediately after the end
of the performance period is the first
date that the performance rights vest
and become exercisable
Expiry/lapse
Expiry date
Exercise price on vesting
What is received on vesting?
Status
Performance rights
Max LTI is 100% of Total Fixed Remuneration (TFR) for CEO
Max LTI is 50% of TFR for other senior executives
2018 Performance Rights
14 Dec 2018
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 CEO only
Granted at no cost to the participant
2018 Performance Rights
1 Dec 2018 – 30 Nov 2021
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
Performance rights lapse if vesting does not occur on testing of performance condition
2018 Performance Rights
30 Nov 2023
2017 Performance Rights
30 Nov 2022
2016 Performance Rights
30 Nov 2021
2015 Performance Rights
30 Nov 2020
Not applicable – provided at no cost
One ordinary share in Beach for every performance right
2018 Performance Rights
In progress
2017 Performance Rights
In progress
2016 Performance Rights
In progress
2015 Performance Rights
Testing completed. Resulted in full vesting of performance rights.
64 64
Details of LTI performance rights issued or in operation in FY19
The fair value of services received in return for LTI performance rights (see table 13) 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.
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:
Managing Director and Chief Executive Officer
The CEO’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 CEO’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 CEO’s
performance that have not been satisfactorily addressed.
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 between one and 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
FY18 and FY19
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 8. These details differ from the actual payments made to senior executives for the reporting period that are set out in Table 1.
ANNUAL REPORT 2019 65
ANNUAL REPORT 2019 65
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Table 8: Senior executives’ remuneration for FY18 and FY19 as required under the Corporations Act
Short Term Employee Benefits
Share based
payments (3)
Other
long term
benefits
Name
M V Kay
M Engelbrecht
D Summers (4)
G Barker (5)
L Marshall (6)
J Schrull
Former Senior Executives
K Hollingsworth (7)
C L Oster (8)
R A Rayner (9)
M R Squire (10)
M R Dodd (11)
TOTAL
Fixed
Remu-
neration(1)
$
Annual
Leave
$
Year
LTI Rights
$
STI Rights
$
STI(2)
Termin-
ation
$
Long
Service
Leave
$
Total
at risk
%
Total
issued
in equity
%
Total
$
2019 1,201,357
2018 903,000
2019 546,262
2018 525,000
2019 690,201
2018 285,797
2019 471,343
2018 198,764
2019 477,050
2018
257,138
2019 482,124
2018 475,000
25,662 580,447 535,859 527,586
15,633 364,662 369,378 763,410
114,293
132,817
20,441
116,260
172,129
77,096 150,428
17,163
144,419 130,283
81,789
(5,173)
41,640 49,908
9,613
17,899
88,984
99,819
56,855
(265)
33,874
28,172
5,863
11,985
90,988
99,819
59,476
331
8,887
35,044
16,542
35,698
89,584
97,273
19,378 100,881
94,527
46,858
133,603
19,182
–
–
–
–
–
–
–
–
–
–
–
–
22,054 2,892,965
9,812 2,425,895
4,069 934,142
3,342 945,158
9,569 1,051,088
13,414 418,271
1,304 718,040
974 279,632
1,304 728,968
974 354,283
2,978 792,218
3,024 772,194
–
–
(469)
–
12,259
–
(19,079)
–
5,838
–
800
2019
–
–
2018 180,073
(757) 272,571
–
2019
–
2018 235,878
(3,669) 362,572
2019
–
–
2018 241,265
(56,933) 741,204
–
2019
–
2018 230,861
8,170 415,489
2019
–
–
2018 261,866
(7,000) 627,766
41,278 7,117,421
2019 3,868,337 60,374 1,139,678 1,076,204 931,550
2018 3,794,642 97,753 816,959 613,007 1,165,529 1,155,794 (28,649) 7,615,035
–
–
102,328
–
–
–
–
59,283
–
–
– 653,873
–
–
–
73,518
–
–
– 399,593
–
–
(8,604)
–
58,821
–
(77,922)
–
56,047
–
(27,493)
–
–
–
–
–
–
–
41,055
–
–
–
–
–
–
58
62
39
43
35
27
34
25
35
23
37
36
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
45
34
37
47
27
24
20
14
20
14
21
12
24
18
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
28
23
(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 FY19, which are expected to be paid in October 2019. FY18 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) FY18 figures shown for Ms Summers are for the period 31 January 2018 to 30 June 2018.
(5) FY18 figures shown for Mr Barker are for the period 19 February 2018 to 30 June 2018. ‘Fixed remuneration’ in FY18 includes a relocation payment made to Mr Barker.
(6) FY18 figures shown for Mr Marshall are for the period 15 January 2018 to 30 June 2018. ‘Fixed remuneration’ in FY18 includes a relocation payment made to Mr Marshall.
(7) 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.
(8) 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.
(9) 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.
(10) 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 14 January 2018.
(11) 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.
66 66
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 for FY19 are set out in Table 9.
Table 9: FY19 non-executive directors’ fees and board committee fees per annum
Board (1)
Board Committee
Chairman/
Deputy
Chairman
$
275,000/
121,000
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
$
110,000
25,000
15,000
25,000
15,000
25,000
15,000
(1) The Chairman does not receive additional fees for committee work. The fees shown are inclusive of the statutory superannuation contribution.
ANNUAL REPORT 2019 67
ANNUAL REPORT 2019 67
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Table 10: Non-executive directors’ remuneration for FY18 and FY19
Name
G S Davis (1)
P J Bainbridge (2)
C D Beckett (3)
S G Layman (4)
P S Moore (5)
J C Morton (6)
R J Richards (7)
R K Stokes (8)
J D McKerlie (9)
F R V Bennett (10)
Total
Directors Fees
(inc committee
fees)
$
Super-
annuation
$
275,000
275,000
131,589
100,500
147,032
142,466
35,160
–
127,854
105,957
123,288
44,178
114,155
116,521
114,155
114,155
45,403
114,155
–
52,667
1,113,636
1,065,599
–
–
12,501
24,500
13,968
13,534
3,340
–
12,146
10,066
11,712
4,197
10,845
11,070
10,845
10,845
4,313
10,845
–
5,003
79,670
90,060
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Total
$
275,000
275,000
144,090
125,000
161,000
156,000
38,500
–
140,000
116,023
135,000
48,375
125,000
127,591
125,000
125,000
49,716
125,000
–
57,670
1,193,306
1,155,659
(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 Layman commenced as a director on 25 February 2019 and became chair of the Audit Committee on 1 July 2019.
(5) Dr Moore became a member of the Risk, Corporate Governance and Sustainability Committee on 23 November 2017 and a member of the Remuneration and Nomination
Committee on 1 July 2018.
(6) Ms Morton commenced as a director on 21 February 2018. She became chair of the Audit Committee on that date until 30 June 2019. She remains a member of the
Audit Committee.
(7) Mr Richards is a member of the Audit Committee. He was chair of the Audit Committee from 23 November 2017 to 21 February 2018.
(8) Mr Stokes is a member of the Remuneration and Nomination Committee.
(9) Mr McKerlie retired as a director on 23 November 2018. Until his retirement he was a member of the Audit Committee.
(10) Ms Bennett retired as a director on 23 November 2017.
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.
68 68
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 11: Movements in performance rights held by key management personnel
Rights
MD & CEO
M V Kay
Senior executives
M Engelbrecht
D Summers
G Barker
L Marshal
J Schrull
Total
Opening
balance
Granted
Rights
exercised/
rights vested
Closing
balance
3,304,363
994,019
(1,110,797)
3,187,585
683,008
320,960
217,845
225,365
570,736
5,322,277
230,966
250,166
172,555
176,936
206,481
2,031,123
(65,243)
–
–
–
(35,418)
(1,211,458)
848,731
571,126
390,400
402,301
741,799
6,141,942
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 12: Shareholdings of key management personnel
Ordinary Shares
Directors
G S Davis
P J Bainbridge
C D Beckett
S G Layman
J D McKerlie
P S Moore
J C Morton
R J Richards
R K Stokes
Senior executives
M V Kay
M Engelbrecht
D Summers
G Barker
L Marshall
J Schrull
Total
Opening
balance
153,226
118,090
65,914
–
124,840
22,500
50,000
179,443
–
1,101,780
–
–
–
–
–
1,815,793
Purchased
Sold
Issued upon
vesting of
performance
rights
Other (1)
Closing
balance
65,000
–
11,780
–
–
21,700
–
50,000
–
–
–
–
30,000
–
–
178,480
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,110,797
65,243
–
–
–
35,418
1,211,458
–
–
–
–
(124,840)
–
–
–
–
–
–
–
–
–
–
(124,840)
218,226
118,090
77,694
–
–
44,200
50,000
229,443
–
2,212,577
65,243
–
30,000
–
35,418
3,080,891
(1) Relates to changes resulting from individuals ceasing to be KMPs during the period.
Specific details of the number of LTI and STI performance rights and CEO commencement and retention rights issued, vested and lapsed
in FY19 for KMP are set out in Table 13.
ANNUAL REPORT 2019 69
ANNUAL REPORT 2019 69
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Table 13: Details of LTI and STI Performance Rights and CEO rights
Name
Date of grant
Performance
rights
on issue at
30 June 2018
Fair Value
$
Granted
Vested
Lapsed
Performance
rights
on issue at
30 June 2019
19 May 2016
1 Dec 2016
1 Dec 2017
1 Dec 2017
1 Dec 2017
6 Dec 2018
6 Dec 2018
14 Dec 2018
1 Dec 2016
1 Dec 2017
1 Dec 2017
1 Dec 2017
6 Dec 2018
6 Dec 2018
14 Dec 2018
9 Apr 2018
6 Dec 2018
6 Dec 2018
14 Dec 2018
9 Apr 2018
6 Dec 2018
6 Dec 2018
14 Dec 2018
9 Apr 2018
6 Dec 2018
6 Dec 2018
14 Dec 2018
21 Feb 2017
1 Dec 2017
1 Dec 2017
1 Dec 2017
6 Dec 2018
6 Dec 2018
14 Dec 2018
815,401
1,049,112
295,396
295,397
849,057
–
–
–
3,304,363
304,879
65,243
65,244
247,642
–
–
–
683,008
320,960
–
–
–
320,960
225,365
–
–
–
225,365
217,845
–
–
–
217,845
275,843
35,418
35,418
224,057
–
–
–
570,736
0.3256
0.4667
1.1295
1.1117
0.6161
1.5559
1.5314
1.0181
0.4667
1.1295
1.1117
0.6161
1.5559
1.5314
1.0181
0.7997
1.5559
1.5314
1.0181
0.7997
1.5559
1.5314
1.0181
0.7997
1.5559
1.5314
1.0181
0.2177
1.1295
1.1117
0.6161
1.5559
1.5314
1.0181
–
–
–
–
–
106,130
106,130
781,759
994,019
1,123,564
–
–
–
–
28,268
28,268
174,430
230,966
264,859
–
12,118
12,119
225,929
250,166
267,432
–
10,389
10,390
156,157
176,936
191,059
–
8,199
8,199
156,157
172,555
184,296
–
–
–
–
24,331
24,332
157,818
206,481
235,793
(815,401)
–
(295,396)
–
–
–
–
–
(1,110,797)
599,144
–
(65,243)
–
–
–
–
–
(65,243)
73,692
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(35,418)
–
–
–
–
–
(35,418)
40,005
M V Kay
Total
Total ($)
M Engelbrecht
Total
Total ($)
D Summers
Total
Total ($)
L Marshall
Total
Total ($)
G Barker
Total
Total ($)
J Schrull
Total
Total ($)
70 70
–
1,049,112
–
295,397
849,057
106,130
106,130
781,759
3,187,585
304,879
–
65,244
247,642
28,268
28,268
174,430
848,731
320,960
12,118
12,119
225,929
571,126
225,365
10,389
10,390
156,157
402,301
217,845
8,199
8,199
156,157
390,400
275,843
–
35,418
224,057
24,331
24,332
157,818
741,799
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Date
performance
rights vest
and become
exercisable
1 Dec 2018
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
1 Jul 2019
1 Jul 2020
1 Dec 2021
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
1 Jul 2019
1 Jul 2020
1 Dec 2021
1 Dec 2020
1 Jul 2019
1 Jul 2020
1 Dec 2021
1 Dec 2020
1 Jul 2019
1 Jul 2020
1 Dec 2021
1 Dec 2020
1 Jul 2019
1 Jul 2020
1 Dec 2021
1 Dec 2019
1 Jul 2018
1 Jul 2019
1 Dec 2020
1 Jul 2019
1 Jul 2020
1 Dec 2021
Looking ahead – Remuneration and related issues for 2020
Human capital management
FY20 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.
Diversity
Beach prepared an FY20-22 Diversity and Inclusion Strategy following a review of sources including:
• an internal Employee Engagement and Enablement Survey;
• Workplace Gender Equality Agency (WGEA) data from other oil and gas companies;
• National Resources Group (NRG) HR Business Practices Survey (HRBPS) Benchmark Report
• Sustainability Reports of other oil and gas companies
From those sources Beach has developed FY20-22 Diversity and Inclusion Strategy Focus Areas as follows:
• Gender Diversity
•
• Flexible Work Practices
• Diversity and Inclusion Awareness
Indigenous Representation
Beach will report progress against those Focus Areas in its 2019 Sustainability Report.
The Board approved measurable objectives for achieving gender diversity and Beach’s progress in achieving those objectives over FY19
are set out in Beach’s 2019 Corporate Governance Statement, available in the Corporate Governance section of Beach’s website.
Review of total fixed remuneration for FY20
Following a benchmarking analysis of executive remuneration, the remuneration of the Managing Director & CEO, Chief Financial Officer
and Group Executive Exploration & Appraisal were reviewed this year.
In reviewing the remuneration of the Managing Director & CEO and Chief Financial Officer, analysis was completed using two different
sets of external data: the Korn Ferry Hay Job Methodology and a comparison of the actual remuneration of individuals in comparable
positions from similar organisations.
In reviewing the remuneration of the Group Executive Exploration & Appraisal, analysis was completed using external data provided
by the National Rewards Group (NRG) based on the participation of similar sector companies who contribute data to the NRG senior
executive remuneration survey.
Consistent with Beach’s objective to develop and maintain a high-performance culture, is an extrinsic link between pay and performance.
Market benchmarking indicated that the Managing Director & CEO, Chief Financial Officer and Group Executive Exploration & Appraisal
remuneration justified an increase to recognise superior company and personal performance and remain market competitive.
Following the benchmarking analysis, the Board approved an increase in the total fixed remuneration of the:
• Chief Financial Officer to $589,050 effective 1 April 2019;
• Managing Director & CEO to $1,266,000 effective 1 July 2019; and
• Group Executive Exploration & Appraisal to $532,950 effective 1 July 2019.
ANNUAL REPORT 2019 71
ANNUAL REPORT 2019 71
FULL YEAR REPORTBEACH ENERGY LIMITED 2019 Remuneration Report (Audited)
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Review of STI, threshold, measures and weightings
For FY20 the hurdle measure for return on capital (ROC) will increase from 7% to 10%. The Board have made some changes to the FY20
STI measures and weightings as follows:
Table 14: FY20 hurdle measures
Performance Measures
Production
Statutory NPAT
Reserves replacement
All in cost/boe
Personal safety
Process safety
Environment – loss of hydrocarbon liquids
Weightings
15%
15%
15%
15%
5%
5%
5%
Company related performance conditions will now make up 75% of the STI metrics.
Review of non-executive director fees
Following a benchmarking analysis against Beach’s peers, the board approved an increase to board fees effective 1 July 2019. The benchmarking
analysis was conducted by comparing Beach non-executive director fees to those of a peer group comprising 24 ASX-listed companies
of similar size. Beach’s market capitalisation was at the 49th percentile of the peer group. The analysis showed Beach’s base board fees
for non-executive directors were at the 11th percentile of the comparator group, and Beach’s base board fee for the Chairman was at the
7th percentile of the comparator group. Base board fees were increased to ensure Beach will be able to attract and retain quality board
candidates. There will be no increase to board committee fees. The increase is within the maximum aggregate remuneration of
non-executive directors of $1.5m approved by shareholders at the 2016 Annual General Meeting.
Table 15: FY20 Board Fees
Chairman
Deputy Chairman
Board Member
$305,000 (FY19 $275,000)
$122,500 (FY19 $121,000)
$122,500 (FY19 $110,000)
72 72
Directors’ Declaration
1.
In the directors’ opinion:
(a) the financial statements and notes set out on pages 74 to 115 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 2019 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 21 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 21.
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
19 August 2019
ANNUAL REPORT 2019 73
ANNUAL REPORT 2019 73
FULL YEAR REPORTBEACH ENERGY LIMITED Consolidated Statement of Profit or Loss and
Other Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Revenue
Cost of sales
Gross profit
Other income
Other expenses
Operating profit before financing costs
Interest income
Finance expenses
Profit before income tax expense
Income tax expense
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 income/(loss), 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(b)
3(b)
14
14
5
5
6
6
2019
$million
2,077.7
(1,207.4)
870.3
41.8
(43.6)
868.5
3.9
(62.0)
810.4
(233.1)
577.3
–
14.4
(2.1)
(4.3)
8.0
585.3
25.35¢
25.28¢
2018
$million
1,267.4
(773.8)
493.6
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¢
74 74
Consolidated Statement of Financial Position
AS AT 30 JUNE 2019
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Contract assets
Assets held for sale
Other
Total current assets
Non-current assets
Property, plant and equipment
Petroleum assets
Exploration and evaluation assets
Goodwill
Deferred tax assets
Contract assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Current tax liabilities
Derivative financial instruments
Contract liabilities
Liabilities associated with assets held for sale
Total current liabilities
Non-current liabilities
Payables
Provisions
Interest bearing liabilities
Deferred tax liabilities
Contract 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.
Consolidated
Note
2019
$million
2018
$million
15
16
7
16
24
8
9
10
25
5
16
12
16
24
16
12
14
5
17
18
171.9
284.9
99.5
–
14.1
6.7
21.4
598.5
26.8
2,726.7
355.3
57.1
79.8
59.6
10.1
3,315.4
3,913.9
324.4
25.4
201.4
–
60.6
1.5
613.3
6.3
842.8
–
35.1
42.0
926.2
1,539.5
2,374.4
1,860.6
167.9
345.9
2,374.4
311.2
273.5
94.4
19.0
–
21.2
4.9
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
ANNUAL REPORT 2019 75
ANNUAL REPORT 2019 75
FULL YEAR REPORTBEACH ENERGY LIMITED Consolidated Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Contributed
equity
$million
Note
Retained
earnings/
(accumulated
losses)
$million
Share
based
payment
reserve
$million
Available
for sale
reserve
$million
Foreign
currency
translation
reserve
$million
Profit
distribution
reserve
$million
Hedging
reserve
$million
Total
$million
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
Interim dividend paid
Increase in share based
payments reserve
Transactions
with owners
Balance as at
30 June 2018
Profit for the year
Other comprehensive
income
Total comprehensive
income/(loss) for
the year
Transactions with
owners in their
capacity as owners:
Disposal of foreign
operations
Shares issued during
the year
Final dividend paid
Interim dividend paid
Increase in share based
payments reserve
Transactions
with owners
Balance as at
30 June 2019
1,558.5
–
(388.7)
198.8
29.1
–
–
–
–
198.8
301.1
(3.8)
3.3
–
–
–
–
–
–
(18.7)
(22.8)
–
300.6
(41.5)
1,859.1
–
(231.4)
577.3
–
–
–
1.5
–
–
–
1.5
–
577.3
–
–
–
–
–
–
17
17
17
19
19
24
17
19
19
–
–
–
–
–
–
–
1.5
1.5
30.6
–
–
–
–
–
–
–
2.2
2.2
1,860.6
345.9
32.8
The accompanying notes form part of these financial statements.
14.9
–
(14.9)
(14.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76 76
15.8
–
1.6
1.6
–
–
–
–
–
–
–
17.4
–
(2.1)
(2.1)
(7.0)
–
–
–
–
172.4
–
–
–
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
172.4
–
(10.1)
–
1,838.0
577.3
–
–
–
–
(22.8)
(22.8)
–
10.1
8.0
10.1
585.3
–
–
–
–
–
–
–
(7.0)
1.5
(22.8)
(22.8)
2.2
(48.9)
2,374.4
(7.0)
(45.6)
8.3
126.8
Consolidated Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Receipts from customers and other
Payments to suppliers and employees
Payments for restoration
Interest received
Financing costs
Derivative payments
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for subsurface assets
Payments for exploration and evaluation assets
Proceeds from government grants
Proceeds on sale of joint operations interests
Payments for acquisition of subsidiaries and joint operations, net of cash acquired
Proceeds from sale of non-current assets
Proceeds from sale of equity investments
Payments received for future restoration liabilities
Acquisition of exploration tenements
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)/provided by financing activities
Net decrease 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
2019
$million
2018
$million
15
24
25
15
15
15
2,179.6
(948.0)
(16.6)
4.1
(31.1)
(18.7)
(131.1)
1,038.2
(110.5)
(271.2)
(97.6)
–
262.4
–
21.2
–
11.3
(3.2)
(187.6)
–
–
–
–
(950.0)
1.5
(45.5)
(994.0)
(143.4)
311.2
4.1
171.9
1,350.6
(633.1)
(25.1)
8.4
(15.9)
(7.9)
(14.1)
662.9
(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
ANNUAL REPORT 2019 77
ANNUAL REPORT 2019 77
FULL YEAR REPORTBEACH ENERGY LIMITED Notes to the Financial Statements
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 2019 was authorised for issue in
accordance with a resolution of the directors on 19 August 2019.
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 a going concern and accruals basis and
is based on the historical cost convention, except for derivative
financial instruments, debt and equity financial assets, and
contingent consideration that have been measured at fair value.
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 2 – Revenue from contracts with customers
Note 5 – Taxation
Note 8 – Property, plant and equipment
Note 9 – Petroleum assets
Note 10 – Exploration and evaluation assets
Note 11 – Interests in joint operations
Note 12 – Provisions
Basis of consolidation
The consolidated financial statements are those of Beach and
its subsidiaries (detailed in Note 20). 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. Non monetary 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. Non monetary 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.
78 78
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. Information on adoption of these
new standards is provided below.
AASB 15 Revenue from Contracts with Customers (AASB 15)
AASB 15 has been adopted from 1 July 2018 and provides a new basis for recognising revenue earned from a contract with a customer.
AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue related Interpretations. AASB 15 establishes a
five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that
reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. AASB 15
also makes consequential amendments to AASB 116 Property, Plant & Equipment and AASB 138 Intangible Assets which may impact on
the date of disposal and the amount of consideration included in the gain or loss arising from the derecognition.
In accordance with the transition provisions of AASB 15, the Group has adopted the full retrospective transition approach. The Group
undertook a detailed review of its revenue contracts and whilst AASB 15 has resulted in some changes in accounting policy and
adjustments to amounts recognised in the consolidated financial statements, the Group concluded there were no adjustments required
to net profit or opening retained earnings on transition as the amounts were not material. No transition practical expedients were applied.
Comparatives for previous reporting period have been restated.
Under AASB 15, the subsequent measurement of provisionally priced sales is not revenue from customers and has been recognised as
other sales revenue. The total impact of transition adjustments on 30 June 2018 reported revenue is as follows:
Crude oil
Gas and gas liquids
Revenue from contracts with customers
Crude oil – revaluation of provisionally priced sales
Sales Revenue
Other Revenue
Total Revenue
30 June 2018
$ million
Transition
adjustment
$million
(Restated)
30 June 2018
$ million
595.0
655.8
1,250.8
–
1,250.8
16.6
1,267.4
(44.4)
–
(44.4)
44.4
–
–
–
550.6
655.8
1,206.4
44.4
1,250.8
16.6
1,267.4
The Group has elected to change from the “entitlements method” to the “sales method” of accounting for sales revenue. Previously under
the entitlements method, sales revenue was recognised on the basis of the Group’s interest in a producing field. Under the sales method,
revenue will be recognised based on volumes sold under contracts with customers, at the point in time where performance obligations
are considered met. Generally, regarding the sale of hydrocarbon products, the performance obligation will be met when the product is
delivered to the specified measurement point (gas) or point of loading/unloading (liquids).
AASB 9 Financial Instruments (AASB 9)
AASB 9 has been adopted from 1 July 2018. It addresses the classification, measurement and derecognition of financial assets, financial liabilities
and hedging and a new impairment model for financial assets and replaces AASB139 Financial Instruments: Recognition and Measurement.
The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only
incurred credit losses. No adjustment was required to opening retained earnings at 1 July 2018 on transition to the forward looking ECL
model. There are no hedging contracts remaining at 30 June 2019 although hedging contracts from FY18 were not impacted by AASB 9
during the FY19 year.
AASB 2016–5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based
Payment Transactions
The adoption of this amendment did not have any impact on the amounts recognised in prior periods and will also not affect the current
or future periods.
ANNUAL REPORT 2019 79
ANNUAL REPORT 2019 79
FULL YEAR REPORTBEACH ENERGY LIMITED Notes to the Financial Statements
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Basis of preparation continued
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 2020:
AASB 16 Leases (AASB 16)
AASB 16 will become effective from financial reporting periods
beginning on or after 1 January 2019 and will be adopted by
the Group from 1 July 2019. AASB 16 provides a new lessee
accounting model which requires a lessee to recognise a
right-of-use asset, representing its right to use the underlying
asset, and lease liabilities for all leases with a term of more than
12 months, unless the underlying asset is of a low value.
At the commencement date of a lease, a lessee will recognise a
liability to make lease payments (i.e., the lease liability) based on
the present value of unavoidable future lease payments to be made
over the lease term. A corresponding asset, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred
and an estimate of any future restoration, removal or dismantling
costs, is also recognised at commencement representing the
right to use the underlying asset during the lease term (i.e., the
right-of-use asset).
The depreciation of the right-of-use asset and interest on the lease
liability will be recognised in the consolidated income statement.
AASB 16 replaces AASB 117 Leases and AASB Interpretation 4
Determining whether an arrangement contains a lease. Accounting
for leases by a lessor remained substantially unchanged under
AASB 16.
The Group operates predominantly as a lessee. The standard will
affect primarily the accounting for the Group’s operating leases,
with no significant impact expected for the Group’s finance leases.
A project team was established comprising appropriate leasing
subject matter specialists, with a detailed review of AASB 16 and
relevant industry guidance being performed. In addition, the Group
undertook a detailed identification and assessment exercise, to
identify and quantify the impact of leasing arrangements that
existed as at the transition date of the standard.
The Group will apply the modified retrospective transition
approach, with election of the option to retrospectively measure
the right-of-use asset as equal to the lease liability.
Furthermore, the Group plans to elect the following transition
practical expedients:
(i) lease arrangements with a short remaining term (less than
12 months) from date of initial application;
(ii) discount rate applied to a portfolio of leases with similar
characteristics; and
(iii) use of hindsight with regards to determination of the lease term.
The operating lease commitments for leases within joint operations
are included on the basis of the Group’s net working interest for
the information provided in Note 13, irrespective of whether the
Group is the operator and whether the lease has been co-signed
by the joint operators or not. However, for transition to AASB 16,
the facts and circumstances of each lease in a joint operation have
been assessed to determine the Group’s rights and obligations
and to recognise assets and liabilities on the group balance sheet
accordingly. This relates mainly to leases of drilling rigs within joint
operations. Where all parties to a joint operation jointly have the
right to control the use of the identified asset and all parties have
a legal obligation to make lease payments to the lessor, only the
Group’s share of the right-of-use asset and the lease liability will
be recognised. However, in cases where the Group is the only party
with the legal obligation to make lease payments to the lessor, the
full lease liability will be recognised. If, however, the underlying asset
is jointly controlled by all parties to the joint operation, the Group
will recognise its net share of the right-of-use asset along with a
receivable representing the amounts to be recovered from the other
parties. If Beach is not legally obliged to make lease payments to the
lessor but jointly controls the asset, the net share of the right-of-use
asset will be recognised on the group balance sheet along with a
payable representing amounts to be paid to the other parties.
Based on the information currently available and having
consideration for AASB 11 Joint Arrangements, the Group estimates
the following impact on its consolidated statement of financial
position as at 30 June 2019. The Group will monitor developments
in any interpretations in accounting for leases including with
respect to joint operations, on an ongoing basis, which may result
in a change to the amounts currently estimated below.
Estimated impact on Consolidated Statement of Financial Position
Right-of-use assets
Lease liabilities
2019
$million
97.2
97.2
80 80
The Group estimates the presentation and timing of recognition
of charges in its consolidated statement of profit or loss and
other comprehensive income will also change as the operating
lease expense currently recognised under AASB 117, typically
on a straight-line basis, will be replaced by depreciation of
the right-of-use asset and interest on the lease liability. In the
consolidated statement of cash flows, operating lease payments
are currently presented within cash flows from operating activities
but under AASB 16 payments will be presented as financing cash
flows, representing repayments of debt, and as operating cash
flows, representing payments of interest. Variable lease payments
that do not depend on index or rate are not included in the lease
liability and will continue to be presented as operating cash flows.
The Group does not expect the adoption of AASB 16 to impact its
ability to comply with debt covenants.
As at the reporting date, the Group has non-cancellable operating
lease commitments of $64.3 million as detailed in Note 13. The
operating lease commitments disclosed in Note 13 include
amounts relating to leases entered into by the Group that had not
yet commenced as at 30 June 2019. In accordance with AASB
16 assets and liabilities will not be recognised until the date of
commencement of the lease. Such commitments will continue
to be disclosed in future under AASB 16.
Year ended 30 June 2021:
AASB 2018-6 Amendments to Australian Accounting
Standards – Definition of a Business
This amendment updates the definition of a business in AASB 3
Business Combinations to help determine whether an acquired
set of activities and assets is a business or not. The amendment
requires prospective application and will provide further clarity on
the accounting treatment for future acquisition transactions. This
amendment is applicable to annual reporting periods beginning on
or after 1 January 2020 but is available for early adoption. The Group
plans to adopt the new standard on the required effective date.
AASB Interpretation 23 Uncertainty over Income
Tax Treatment
This Interpretation addresses the accounting for income taxes
when tax treatments involve uncertainty that affects the
application of AASB 112 and does not apply to taxes or levies
outside the scope of AASB 112, nor does it specifically include
requirements relating to interest and penalties associated with
uncertain tax treatments. The interpretation is effective for annual
reporting periods beginning on or after 1 January 2019, but certain
transition reliefs are available. The Group plans to adopt the new
standard on the required effective date.
ANNUAL REPORT 2019 81
ANNUAL REPORT 2019 81
FULL YEAR REPORTBEACH ENERGY LIMITED Notes to the Financial Statements
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 2019 and 30 June 2018 are set
out as follows:
SAWA
Victoria
New Zealand
Total
2019
$million
2018
$million
2019
$million
2018
$million
2019
$million
2018
$million
2019
$million
2018
$million
1,304.6
955.5
446.8
208.2
174.0
87.1
1,925.4
1,250.8
782.0
(257.9)
–
524.1
576.7
(207.2)
(60.5)
309.0
344.5
(242.4)
–
102.1
156.0
(91.0)
–
65.0
114.1
(22.3)
–
91.8
56.8
(14.3)
–
42.5
2,448.3
2,124.6
739.2
1,073.4
301.9
276.1
643.0
459.0
412.4
330.0
145.4
76.7
107.6
392.1
499.7
112.0
862.5
974.5
17.0
292.3
309.3
419.3
690.9
1,110.2
0.4
8.8
9.2
0.1
277.4
277.5
1,240.6
(522.6)
–
718.0
152.3
41.8
(58.1)
(43.6)
810.4
(233.1)
577.3
3,489.4
789.5
(312.5)
(60.5)
416.5
16.6
24.1
(36.6)
(137.1)
283.5
(84.7)
198.8
3,474.1
424.5
3,913.9
1,200.8
602.7
4,076.8
865.7
338.7
1,539.5
1,373.1
2,238.8
125.0
693.2
818.2
25.5
531.4
1,830.8
2,362.2
14.5
843.7
2,376.7
Segment revenue
Revenue from external customers
During the year revenue from three
customers amounted to $1,053 million
(2018: $591.6 million from two customers)
arising from sales from SAWA and
Victoria segments.
Segment results
Gross segment result before
depreciation, amortisation and
impairment
Depreciation and amortisation
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 evaulation assets
Petroleum assets
Total corporate and unallocated assets
Total additions and acquisitions of
non-current assets
82 82
Non-current assets *
*
excluding financial assets and deferred taxes
Australia
New Zealand
Total
2019
$million
2,959.3
2018
$million
3,005.6
2019
$million
266.2
2018
$million
272.9
2019
$million
3,225.5
2018
$million
3,278.5
2. Revenue from contracts with customers and other income
Revenue from contracts with customers is recognised in the income statement when the performance obligations are considered met,
which is when control of the hydrocarbon products or services provided are transferred to the customer. Revenue is recognised at an
amount that reflects the consideration the Group expects to be entitled to, net of goods and services tax or similar taxes.
Product sales
Sales revenue is recognised using the “sales method” of accounting. The sales method results in revenue being recognised based
on volumes sold under contracts with customers, at the point in time where performance obligations are considered met. Generally,
regarding the sale of hydrocarbon products, the performance obligation will be met when the product is delivered to the specified
measurement point (gas) or point of loading/unloading (liquids).
The Group’s sales of crude oil, liquefied natural gas, ethane, condensate, LPG, and in some contractual arrangements, natural gas, are
based on market prices. In contractual arrangements with market base pricing, at the time of the delivery, there is only a minimal risk of
a change in transaction price to be allocated to the product sold. Accordingly, at the point of sale where there is not a significant risk of
revenue reversal relative to the cumulative revenue recognised, there is no constraining of variable consideration.
Where the sales price is not final at the point the performance obligations are met, any subsequent measurement of these provisionally
priced sales is not revenue from customers and has been recognised as other sales revenue.
Contract liabilities and contract assets
A contract liability for deferred revenue is recorded for obligations under sales contracts to deliver natural gas in future periods for which
payment has already been received. Where the period between when payment is received and performance obligations are considered
met, is more than 12 months, an assessment will be made for whether a significant financing component is required to be accounted for.
Deferred revenue liabilities unwind as “revenue from contracts with customers”, upon settlement of the obligation, and if a significant
financing component associated with deferred revenue exists, an interest expense will also be recognised over the life of the contract.
On acquisition of the Lattice and Toyota Tsusho interests (refer note 25), pre-existing revenue contracts were fair valued, resulting in
contract assets and liabilities being recognised. Both the contract assets and liabilities represent the differential in contract pricing and
market price, and will be realised as performance obligations are considered met in the underlying revenue contract. To the extent a
contract asset or liability represents the fair value differential between contract price and market price, it will be unwound through “other
operating revenue or expense”.
(a) Revenue
Crude oil(1)
Sales gas and ethane
Liquefied petroleum gas
Condensate
Gas and gas liquids
Revenue from contracts with customers
Crude oil – revaluation of provisionally priced sales(2)
Sales Revenue
Other operating revenue
Total revenue
(1) Inclusive of realised hedge settlements and premiums paid of $16.4 million (FY18 $10.2 million).
(2) Provisionally priced oil sales revenue recorded at 30 June 2019 totalled $94.5 million (FY18 $80.4 million).
Consolidated
2019
$million
779.3
755.6
170.6
223.4
1,149.6
1,928.9
(3.5)
1,925.4
152.3
2,077.7
2018
$million
550.6
416.8
97.5
141.5
655.8
1,206.4
44.4
1,250.8
16.6
1,267.4
ANNUAL REPORT 2019 83
ANNUAL REPORT 2019 83
FULL YEAR REPORTBEACH ENERGY LIMITED Notes to the Financial Statements
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
2. Revenue from contracts with customers and other income continued
(b) Other income
Gain on sale of joint operations interests
Gain on liquidation of overseas subsidiary
Gain on derivative financial instruments
Gain on settlement of restoration obligation
Gain on sale of investments
Gain on sale of non-current assets
Government grants received
Foreign exchange gains
Other
Total other income
Note
24
24
Consolidated
2019
$million
2018
$million
13.5
7.0
13.6
–
–
–
–
4.2
3.5
41.8
–
–
–
15.0
5.3
1.0
1.2
1.6
–
24.1
3. Expenses
The Group’s significant expenses in operating the business are described below split between cost of sales and other expenses including
impairment and corporate and other costs.
(a) Cost of sales
Operating costs
Royalties
Total operating costs
Depreciation and amortisation of petroleum assets
Third party oil and gas purchases
Change in inventory
Total cost of sales
(b) Other expenses
Impairment
Impairment expense on other property, plant & equipment
Impairment of exploration and evaluation assets
Total impairment expense
Other
Loss on derivative financial instruments
Loss on sale of non-current assets
Depreciation of property, plant and equipment
Acquisition and integration costs
Corporate expenses
Other expenses
Total other expenses
84 84
Note
9
Note
8
10
8
25
Consolidated
2019
$million
385.1
155.9
541.0
522.6
139.3
4.5
1,207.4
2018
$million
273.1
99.5
372.6
312.5
75.8
12.9
773.8
Consolidated
2019
$million
2018
$million
–
–
–
–
0.1
3.9
1.6
38.0
43.6
43.6
1.2
87.1
88.3
13.2
–
2.0
50.1
44.0
109.3
197.6
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 28 June 2019 was $1.985 as compared to $1.755 as at
29 June 2018.
Employee Share Plan – A new employee share plan was approved
by shareholders during the year where Employees who buy shares
under the Plan will have those shares matched by Beach, provided
any relevant conditions determined by the Board are satisfied.
Eligible Employees are employees of the Group, other than a
non-executive director and includes another person determined
by the Board as eligible to participate in the Plan. The Board will
have discretion to set an annual limit on the value of shares that
participants may purchase under the Plan (not exceeding $5,000)
with Purchased Shares to be acquired at a price determined by the
Board at the time of invitation. The Board currently intends that
Purchased Shares will be purchased periodically at the prevailing
market price. Participants pay for their Purchased Shares using their
own funds which may include salary sacrifice. To receive Matched
Shares, a participant must satisfy the conditions determined by the
Board at the time of the invitation. As at 30 June 2019, no shares had
been purchased or issued under this plan.
Incentive Rights – The Group operates an Executive Incentive
Plan (EIP) 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 senior executives 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 outlined below.
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.
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
Number
Balance as at 30 June 2017
Loans repaid during 2018 financial year
Balance as at 30 June 2018
Loans repaid during 2019 financial year
Balance as at 30 June 2019
6,703,641
(3,021,983)
3,681,658
(1,140,170)
2,541,488
ANNUAL REPORT 2019 85
ANNUAL REPORT 2019 85
FULL YEAR REPORTBEACH ENERGY LIMITED Notes to the Financial Statements
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
4. Employee benefits continued
Equity settled compensation continued
Grant date
Vesting date
Share price at grant date (A$)
Exercise price (A$)
Expected volatility (average)
Vesting Period (years)
Risk free rate
Dividend yield
Number of securities issued
Fair value of security at grant date (A$)
Total fair value at grant date
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
2017
STI Rights
2017
STI Rights
2018
LTI Rights
6 Dec 2018
1 Jul 2019
1.575
Nil
n/a
0.6
n/a
1.60%
218,962
1.5559
340,683
6 Dec 2018
1 Jul 2020
1.575
Nil
n/a
1.6
n/a
1.60%
218,966
1.5314
335,325
14 Dec 2018
1 Dec 2021
1.645
Nil
49.33%
3.0
2.04%
1.60%
2,328,932
1.0181
2,371,086
Consolidated
2019
number
2018
number
6,623,901
2,766,860
–
(1,678,886)
7,711,875
6,820,796
4,114,642
(3,097,646)
(1,213,891)
6,623,901
During the period, Beach issued 437,928 unlisted rights pursuant to the EIP for the 2017 STI offer. 218,962 of the unlisted performance
rights vest on 1 July 2019 and 218,966 vest on 1 July 2020 subject to the holder of the rights remaining employed with Beach on the
vesting dates. Beach also issued 2,328,932 LTI unlisted rights under the EIP. These rights, which expire on 30 November 2023, are
exercisable for nil consideration and are not exercisable before 1 December 2021.
86 86
5. Taxation
Taxation on the profit or loss for the year comprises current and deferred tax. Taxation is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates and laws enacted or substantively enacted at
the reporting date, and any adjustments to tax payable in respect of previous years.
Deferred tax is determined using the statement of financial position approach on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the statement of financial position. Deferred tax assets are recognised to the extent
that it is probable that future taxable profits will be available against which the temporary differences or unused tax losses and tax offsets
can be utilised.
Deferred tax is not recognised for temporary differences arising from goodwill or from the initial recognition of assets and liabilities
(other than a business combination) in a transaction that affects neither accounting profit nor taxable income.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied when the asset is realised or the liability is
settled, based on the laws that have been enacted or substantively enacted at the reporting date.
Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and when the tax balances are
related to taxes levied by the same tax authority and the entity intends to settle its tax assets and liabilities on a net basis.
Petroleum Resource Rent Tax (PRRT)
PRRT is considered, for accounting purposes, to be a tax based on income. Accordingly, current and deferred PRRT expense is measured
and disclosed on the same basis as income tax.
The impact of future augmentation on expenditure is included in the determination of future taxable profits when assessing the extent to
which a deferred tax asset for PRRT can be recognised in the statement of financial position. From 1 July 2019, the existing PRRT regime
was amended to remove all Australian petroleum production sourced from projects located onshore and amend the augmentation rates
for carry forward expenditure. These changes have been assessed to measure and disclose the current and deferred PRRT expense.
Australian income tax consolidation
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 income tax consolidated group.
Beach is responsible for recognising the current tax liability, current tax assets and deferred tax assets arising from unused tax losses
and credits for the income tax consolidated group. The Group has applied the separate taxpayer approach in determining the appropriate
amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.
Beach has entered into a tax sharing agreement 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.
ANNUAL REPORT 2019 87
ANNUAL REPORT 2019 87
FULL YEAR REPORTBEACH ENERGY LIMITED Notes to the Financial Statements
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
5. Taxation continued
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
• When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST
is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
Statement of Financial Position.
Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(a) Income tax expense/(benefit)
Income tax recognised in the statement of profit or loss of the Group is as follows:
Recognised in the statement of profit or loss
Current tax expense
Current year
Adjustments for prior years
Total current tax expense/(benefit)
Deferred tax expense
Origination and reversal of temporary differences
Adjustments for prior years
Derecognition/(recognition) of tax losses
Total deferred tax expense/(benefit)
Total income tax expense/(benefit)
Consolidated
2019
$million
2018
$million
242.5
(10.5)
232.0
1.7
(3.4)
2.8
1.1
233.1
101.0
3.3
104.3
(17.8)
(0.1)
(1.7)
(19.6)
84.7
(b) Numerical reconciliation between tax expense and prima facie tax expense
A reconciliation between income tax expense calculated on profit before tax to income tax expense included in the statement of profit or loss
Consolidated
2019
$million
810.4
243.1
2018
$million
283.5
85.0
0.7
2.0
–
(1.6)
2.8
–
(13.9)
233.1
5.2
0.2
(1.6)
(0.6)
(1.7)
(5.0)
3.2
84.7
Accounting profit before income tax
Prima facie tax on accounting profit before tax at 30%
Adjustment to income tax expense due to:
Non-deductible expenditure
Losses of controlled foreign entities not recognised
Sale of investments
Impact of tax rates applicable outside Australia
Derecognition/(recognition) of tax losses
Non assessable income
Under/(over) provision in prior years
Income tax expense reported in the Statement of Profit or Loss
88 88
(c) Tax effects relating to each component of other comprehensive income ($million)
Group
Available-for-sale financial assets
Hedging reserve
Exchange difference on translating foreign
controlled entities
2019
Tax
In Equity
–
(4.3)
Net of
tax
amount
–
10.1
Before
tax
amount
(17.2)
(14.4)
–
(3.0)
1.6
2018
Tax
benefit
2.3
4.3
–
Net of
tax
amount
(14.9)
(10.1)
1.6
Before
tax
amount
–
14.4
(3.0)
(d) Movement in Group deferred tax balances ($million)
Current financial year
Oil & Gas Assets
Assets and Liabilities
Held For Sale
Provisions
Employee benefits
Tax Losses
Other Items
Inventories
Tax assets/(liabilities)
before set-off
Set-off of deferred tax assets
in Australia
Net deferred tax asset/
(liabilities)
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
Net deferred tax asset/
(liabilities)
Balance
1 July 2018
Recognised
in income
Acquired
Recognised
in OCI/Equity
Balance
30 June 2019
Deferred
Tax Asset
Deferred
Tax Liability
(217.1)
(26.5)
31.0
–
(212.6)
82.0
(294.6)
0.5
232.4
5.2
–
2.4
(0.4)
23.0
–
32.0
1.2
6.2
(13.6)
(0.4)
(1.1)
–
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
–
1.6
(12.0)
0.5
–
6.3
–
27.4
–
Acquired
(240.7)
–
–
148.0
3.9
5.0
–
(83.8)
–
–
–
–
–
(4.6)
–
(4.6)
–
2.1
252.4
6.9
6.2
(9.5)
(0.8)
2.1
272.2
6.9
6.2
11.4
–
–
(19.8)
–
–
(20.9)
(0.8)
44.7
380.8
(336.1)
–
(301.0)
301.0
79.8
(35.1)
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)
55.1
–
(272.2)
–
0.5
232.4
5.2
20.4
–
–
–
–
(18.0)
(0.4)
23.0
313.6
(290.6)
–
(244.8)
244.8
68.8
(45.8)
ANNUAL REPORT 2019 89
ANNUAL REPORT 2019 89
FULL YEAR REPORTBEACH ENERGY LIMITED 5. Taxation continued
(e) 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
2019
$million
25.0
9.3
1,057.6
1,091.9
2018
$million
18.7
12.5
4,277.3
4,308.5
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
2019
$million
577.3
2018
$million
198.8
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
Calculation of EPS is as follows:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2019
Number
2018
Number
2,277,720,328 2,170,981,952
5,136,462
2,176,118,414
6,436,398
2,284,156,726
25.35¢
25.28¢
9.16¢
9.14¢
There were no 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. Accordingly,
these have been excluded from the calculation of diluted EPS.
A further 679,224 shares were issued upon vesting of unlisted performance rights issued on 1 December 2017 and 6 December 2018
pursuant to the Beach Energy Ltd Executive Incentive Plan for the 2016 and 2017 Short Term Incentive Offers following satisfaction of the
retention condition.
90 90
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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.
Petroleum products
Drilling and maintenance stocks
Less provision for obsolesence
Total current inventories at lower of cost and net realisable value
Petroleum products included above which are stated at net realisable value
Consolidated
2019
$million
2018
$million
66.5
41.4
(8.4)
99.5
–
70.5
38.0
(14.1)
94.4
0.9
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
triggers. 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 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 between 4–33%.
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
Reclassification to assets held for sale(1)
Depreciation expense
Total land and buildings
Consolidated
Note
2019
$million
2018
$million
–
–
–
–
–
–
–
–
–
–
–
22.6
(1.2)
(21.0)
(0.4)
–
24
(1) In FY18, 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.
ANNUAL REPORT 2019 91
ANNUAL REPORT 2019 91
FULL YEAR REPORTBEACH ENERGY LIMITED 8. Property, plant and equipment (PPE) continued
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 sale (1)
Depreciation expense
Disposals
Total plant and equipment
Total property, plant and equipment
Consolidated
Note
2019
$million
2018
$million
33.3
7.5
(14.0)
26.8
5.5
25.5
–
(3.9)
(0.3)
26.8
26.8
13.1
2.7
(10.3)
5.5
3.8
3.4
(0.2)
(1.5)
–
5.5
5.5
24
(1) In FY18, 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 13. 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.
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 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. Approximately three quarters of Beach’s 2P (developed and Undeveloped) Reserves at
30 June 2019 have been independently audited by RISC Advisory in accordance with Beachs’ reserves policy. 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 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.
92 92
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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
Foreign exchange movement
Total field land and buildings
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 (1)
Reclassification to assets held for sale
Transfer to field land and buildings
Transfer from exploration and evaluation assets
Depreciation expense
Disposals
Foreign exchange movement
Total production facilities and field equipment
Subsurface assets
Subsurface assets at cost
Subsurface assets under construction
Less accumulated depreciation
Total subsurface assets
Reconciliation of movement in subsurface assets
Balance at beginning of financial year
Additions
Acquisition of subsidiaries and joint operation interests (1)
Increase in restoration
Transfer from exploration and evaluation assets
Transfer to field land and buildings
Reclassification to assets held for sale
Borrowing costs capitalised
Foreign exchange movement
Amortisation expense
Disposals
Total subsurface assets
Consolidated
Note
2019
$million
2018
$million
85.7
(34.5)
51.2
60.6
–
–
–
–
(10.0)
0.6
51.2
1,814.7
125.9
(851.8)
1,088.8
1,261.5
75.3
(53.3)
(3.9)
–
6.8
(77.6)
(127.3)
7.3
1,088.8
3,013.2
306.8
(1,733.3)
1,586.7
1,388.1
274.7
234.3
144.1
140.6
–
(1.3)
18.1
(0.1)
(435.0)
(176.8)
1,586.7
87.9
(27.3)
60.6
22.3
32.8
10.1
1.0
4.1
(9.7)
–
60.6
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
24
24
Total petroleum assets
2,726.7
2,710.2
(1) Acquisitions of petroleum assets represent adjustments made in the current period to the provisional purchase price accounting for the acquisition of the Lattice and Toyota
interests in the previous financial year as detailed in note 25.
ANNUAL REPORT 2019 93
ANNUAL REPORT 2019 93
FULL YEAR REPORTBEACH ENERGY LIMITED 9. Petroleum assets continued
Estimates of reserve quantities continued
The carrying amounts of petroleum assets 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 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. Where the carrying value of a
CGU includes goodwill, the recoverable amount of the CGU is estimated
regardless of whether there is an indicator of impairment or not.
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.
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.
Impairment and impairment reversal indicator modelling
In determining whether there is an indicator of impairment, 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$62.50/bbl in FY20 and US$70/bbl
for FY21 and beyond.
• A$/US$ exchange rate of 0.70 in FY20 and 0.75 for FY21 and
beyond.
• Post-tax real discount rate of 7%.
For impairment reversals, the present value of future cash flows
are considered using lower oil price scenarios that sit within
independent broker estimates.
No indicators of impairment or impairment reversal were
identified in the current year.
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 and where the rights to tenure of the area of interest are
current. 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) is defined by Beach as 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.
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.
94 94
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 13.
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
Transfer to petroleum assets
Reclassification to assets held for sale
Impairment of exploration and evaluation assets
Disposal of joint operation interests
Borrowing costs capitalised
Total exploration and evaluation assets
Consolidated
Note
2019
$million
2018
$million
25
24
478.9
102.6
17.0
1.9
(147.4)
(1.5)
–
(99.7)
3.5
355.3
255.2
77.2
29.4
436.3
(232.1)
–
(87.1)
–
–
478.9
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.
ANNUAL REPORT 2019 95
ANNUAL REPORT 2019 95
FULL YEAR REPORTBEACH ENERGY LIMITED 11. Interests in joint operations continued
Accounting for interests in other entities continued
Joint Operation
Principal activities
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)
Otway Gas Project
Bass Basin (Tasmania)
BassGas Project
Perth Basin (Western Australia)
Beharra Springs
Waitsia Gas Project
International
Taranaki Basin (New Zealand)
Kupe Gas Project
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
% interest
2019
2018
75.0
40.0
40.0
40.0
50.0
33.4
33.4
38.5
40.0
30.0
39.9
60.0
53.8
67.0
50.0
75.0
40.0
40.0
40.0
50.0
33.4
33.4
38.5
40.0
30.0
39.9
n/a
53.8
67.0
50.0
Gas production
50.0
50.0
Details of commitments for expenditure and contingent liabilities incorporating the Group’s interests in joint operations are shown in
Notes 13 and 26 respectively.
12. 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 holds provisions for the future removal costs of offshore and onshore oil and gas platforms, production facilities and pipelines
at different stages of the development, construction and end of their economic lives. Most of these decommissioning events are many
years in the future and the precise requirements that will have to be met when the removal event occurs are uncertain. Decommissioning
technologies and costs are constantly changing, as are political, environmental, safety and public expectations. The timing and amounts
of future cash flows are subject to significant uncertainty and estimation is required in determining the amounts of provisions to be
recognised. Any changes in the expected future costs are reflected in both the provision and the asset.
96 96
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
The provision for environmental liabilities represents the Group’s best estimate based on current industry practice, current regulations,
technology, price levels and expected plans for end of life remediation. The restoration costs have been prepared using deterministic
estimates that are largely classified as Class 4, with two exceptions relating to ATP940 and Katnook assets which were prepared on
a Class 2 basis. Within Beach’s provision the following costs have been provided:
• For offshore assets provision has been made for installation of permanent well barriers, sever casings and conductors, recovery of
nearshore subsea flowlines, umbilicals and manifolds, platform preparation, jacket and topside removal, cutting of piles, removal and
disposal of recovered components. It is currently the Group’s intention to leave all subsea piles in-situ.
• For onshore assets provision has been made for demolition and removal of facilities, removal of aboveground pipelines and services,
flush and clean and leave in-situ below ground pipelines, removal of contaminated soil, site contouring and revegetation.
• For non-operated joint venture assets, the provision recorded represents the Group’s share of the relevant Joint Venture operator
estimate as responsibility for the restoration will reside with the operator who has the best knowledge and understanding of the
assets. The Group regularly assesses the operator estimates with the assistance of Group appointed experts.
Actual costs and cash outflows can differ from current estimates because of changes in laws and regulations, public expectations, prices,
discovery and analysis of site conditions and changes in clean-up technology. The timing and amount of future expenditures relating to
decommissioning and environmental liabilities are reviewed annually, together with the interest rate used in discounting the cash flows.
The interest rate used to determine the balance sheet obligations at 30 June 2019 was within the range 1.3% to 2.4% (2018 within the
range 1.9% to 3.1%), which was based on applicable government bonds with a tenure aligned to the tenure of the liability.
Changes in assumptions in relation to the group’s provisions could result in a material change in their carrying amounts within the next
financial year. A 0.5% change in the nominal discount rate could have an impact of approximately $55 million on the value of the group’s
provisions. The impact on the group income statement would not be significant as the majority of the group’s provisions relate to
decommissioning costs with adjustments recorded against the carrying value of the Group’s assets.
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 2018
Provision made during the year
Provision paid/used during the year
Unwind of discount
Acquisitions/disposals
Net transfer to liabilities held for sale
Balance at 30 June 2019
Consolidated
2019
$million
2018
$million
–
13.6
11.8
25.4
2.2
840.6
842.8
4.3
11.4
23.9
39.6
6.0
760.8
766.8
Restoration
$million
Employee
entitlements
$million
Other
$million
784.7
161.1
(15.1)
22.7
(102.1)
1.1
852.4
17.4
2.6
(4.2)
–
–
–
15.8
4.3
–
(4.3)
–
–
–
–
ANNUAL REPORT 2019 97
ANNUAL REPORT 2019 97
FULL YEAR REPORTBEACH ENERGY LIMITED 13. 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
2019
$million
2018
$million
116.7
0.6
–
117.3
19.9
36.2
5.7
61.8
31.1
0.4
–
31.5
56.2
23.5
0.7
80.4
The Group’s share of the above commitments that relate to its interest in joint arrangements are $109.1 million (2018: $27.3 million) for
capital commitments and $57.3 million (2018: $31.9 million) for minimum exploration commitments.
Non-Cancellable Operating Lease 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
2019
$million
2018
$million
28.8
24.2
11.3
64.3
12.3
1.2
–
13.5
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.
98 98
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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.
14. 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.
Borrowing costs relating to major oil and gas assets under development are capitalised as a component of the cost of development.
Where funds are borrowed specifically for qualifying projects, the actual borrowing costs incurred are capitalised. Where the projects
are funded through general borrowings, the borrowing costs are capitalised based on the weighted average cost of borrowing. Borrowing
costs incurred after commencement of commercial operations are expensed to the income statement.
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
Interest expense
Discount unwinding on net present value assets and liabilities
Less borrowing costs capitalised (1)
Total finance expenses
Interest income
Net finance expenses
Non-current Borrowings
Bank debt
Less debt issuance costs (2)
Total non-current borrowings
Consolidated
2019
$million
2018
$million
21.7
21.2
40.7
(21.6)
62.0
(3.9)
58.1
–
–
–
10.6
18.1
14.9
–
43.6
(7.0)
36.6
950.0
(24.3)
925.7
(1) Includes borrowing costs for the half year to December 2018 of $8.3 million which were only capitalised in the half year to June 2019.
(2) Remaining unamortised cost relating to the Syndicated Debt Facility were reclassified to other current and non-current assets in FY19.
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).
During the period, Beach voluntarily prepaid and cancelled the Facility A and Facility B commitments of $950 million.
As at 30 June 2019, Facility C remained fully undrawn, with $61.9 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 FY19 of 3.79% (FY18: 3.76%).
ANNUAL REPORT 2019 99
ANNUAL REPORT 2019 99
FULL YEAR REPORTBEACH ENERGY LIMITED 15. Cash flow reconciliation
For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand, cash at bank, term deposits with banks,
and highly liquid investments in money market instruments, net of outstanding bank overdrafts subject to them being an insignificant risk
of change in value and a short term maturity. 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.
(a) Reconciliation of cash and cash equivalents
Cash at bank
Term deposits
Cash and cash equivalents
(b) Reconciliation of net profit to net cash provided by operating activities
Net profit after tax
Less items classified as investing/financing activities:
– Loss/(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
– Recognition of deferred tax assets/(liability) on items direct in equity
Add/(less) non-cash items:
– Share based payments
– Depreciation and amortisation
– Impairment expense
– Unrealised hedging gain
– Discount unwinding on provision for restoration
– Provision for stock obsolesence movement
– Gain on liquidation of overseas subsidiary
– Borrowing costs
– 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
– Increase/(decrease) in contract liabilities
Net cash provided by operating activities
(c) Reconciliation of liabilities arising from financing activities to financing cash flows
Opening Balance
Financing cash flows(1)
Non-cash changes
Closing Balance
(1) Financing cash flows consist of the net amount of proceeds from borrowing and repayments of borrowings in the statement of cash flows.
100 100
Consolidated
2019
$million
2018
$million
171.9
–
171.9
231.2
80.0
311.2
577.3
198.8
0.1
–
(13.5)
–
–
(4.4)
559.5
2.1
526.5
–
(0.3)
22.7
(13.8)
(7.0)
18.3
3.5
1,111.5
(10.0)
6.4
(15.3)
1.0
(12.3)
(22.5)
101.2
(10.7)
9.0
(13.6)
(106.5)
1,038.2
925.7
(950.0)
24.3
–
(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
148.0
772.3
5.4
925.7
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 16. 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.
The Group classifies its financial instruments in the following
categories: financial assets at amortised cost, financial assets at
fair value through profit or loss (FVTPL), financial assets at fair
value through other comprehensive income (FVOCI), financial
liabilities at amortised cost and derivative instruments. The
classification depends on the purpose for which the financial
instruments were acquired, which is determined at initial
recognition based upon the business model of the Group and the
characteristics of the contractual cash flows of the instrument.
With the exception of trade receivables, the Group initially
measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction
costs. Trade receivables are measured at the transaction price
determined under AASB 15.
Financial assets at amortised cost: A financial asset is classified
in this category if the asset is held with the objective of collecting
contractual cash flows and the contractual terms give rise on
specified dates to cash flows that are solely payments of principal
and interest. These assets are subsequently measured using the
effective interest (EIR) method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
Financial assets at fair value through other comprehensive
income: A financial asset is classified in this category if it relates
to debt securities where the contractual cash flows are solely
principal and interest and the objective of the Group’s business
model is achieved both by collecting contractual cash flows and
selling financial assets. Upon disposal, any balance within the
OCI reserve for these debt investments is reclassified to the
statement of profit or loss.
Financial assets at fair value through profit or loss: A financial
asset is classified in this category if it is held for trading,
designated upon initial recognition at fair value through profit
or loss, or mandatorily required to be measured at fair value.
Financial assets are classified as held for trading if they are
acquired for the purpose of selling or repurchasing in the near
term. Derivatives are also classified as held for trading unless they
are designated as effective hedging instruments. Financial assets
with cash flows that are not solely payments of principal and
interest are classified and measured at fair value through profit
or loss, irrespective of the business model. 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.
Financial liabilities: On initial recognition, the Group measures a
financial liability at its fair value minus, in the case of a financial
liability not at fair value through profit or loss, transaction costs
that are directly attributable to the issue of the financial liability.
After initial recognition, these financial liabilities are stated at
amortised cost. Policies for the recognition and subsequent
measurement of derivative liabilities are as outlined below.
Derivative instruments: Derivative financial instruments entered
into by the Group for the purpose of managing its exposures to
market risks arising in the normal course of business have been
assessed for hedge accounting. The principal derivatives that may
be used are commodity derivatives, forward foreign exchange
contracts and interest rate swaps. The use of derivative financial
instruments is subject to a set of policies, procedures and limits
approved by the Board of Directors. The Group does not trade in
derivative financial instruments for speculative purposes.
(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 for identical assets or liabilities;
• Level 2 – the fair value is estimated using inputs other than
quoted prices included in Level 1 that are observable for
substantially the full term of 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.
ANNUAL REPORT 2019 101
ANNUAL REPORT 2019 101
FULL YEAR REPORTBEACH ENERGY LIMITED 16. Financial risk management continued
(a) Fair values continued
The Group’s financial assets and financial liabilities measured and recognised at fair value is set out below:
Financial assets/
financial liabilities at
amortised cost
Financial assets
at FVTPL
Derivative
financial instruments
Total
Carrying amount
Note
2019
$million
2018
$million
2019
$million
2018
$million
2019
$million
2018
$million
2019
$million
2018
$million
Financial assets
Derivatives
Cash
Receivables
Other
Financial liabilities
Derivatives
Payables
Interest bearing liabilities
14
–
171.9
284.9
31.5
488.3
–
330.7
–
330.7
–
311.2
273.5
10.2
594.9
–
311.1
950.0
1,261.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19.0
–
–
–
19.0
47.0
–
–
47.0
–
171.9
284.9
31.5
488.3
–
330.7
–
330.7
19.0
311.2
273.5
10.2
613.9
47.0
311.1
950.0
1,308.1
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
There were no cash flow hedges in place at 30 June 2019 (FY18: 2,782,350 bbls of Crude oil) and no outstanding unrealised losses in
the hedge reserve. 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).
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2019 and there
have been no transfers between the levels of the fair value hierarchy during the year ended 30 June 2019.
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
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.
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.
102 102
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 There are no commodity hedges outstanding at 30 June 2019.
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.
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
2019
$million
2018
$million
–
–
171.9
–
171.9
80.0
80.0
231.2
(950.0)
(718.8)
Sensitivity analysis for all market risks
The following table demonstrates the estimated sensitivity to changes in the relevant market parameter, with all variables held constant,
on post tax profit and equity, which are the same as the profit impact flows through to equity. These sensitivities should not be used to
forecast the future effect of a movement in these market parameters on future cash flows which may be different as a result of the Group
commodity hedge book.
Impact on post-tax profit and equity
A$/$US – 10% increase in Australian/US dollar exchange rate
A$/$US – 10% decrease in Australian/US dollar exchange rate
US$ oil price – increase of $10/bbl
US$ oil price – decrease of $10/bbl
Interest rates – increase of 1%
Interest rates – decrease of 1%
Consolidated
2019
$million
2018
$million
(51.3)
64.8
82.1
(83.2)
(2.3)
2.3
(39.1)
47.0
57.2
(61.6)
(0.7)
0.7
ANNUAL REPORT 2019 103
ANNUAL REPORT 2019 103
FULL YEAR REPORTBEACH ENERGY LIMITED 16. Financial risk management continued
(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.
The Group applied the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of the
lifetime expected loss provision for all trade receivables and contract assets. Under this method, determination of the loss allowance
provision and expected loss rate incorporates past experience and forward-looking information, including the outlook for market demand
and forward-looking interest rates. As the expected loss rate at 30 June 2019 is 0.1% (2018: 0.1%), a loss allowance has been recorded at
30 June 2019 of $0.4 million (FY18: $0.4 million).
Ageing of Receivables :
Receivables not yet due
Receivables past due
Considered impaired
Total Receivables
Consolidated
2019
$million
2018
$million
284.9
0.4
(0.4)
284.9
272.1
1.8
(0.4)
273.5
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 14.
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
2019
$million
2018
$million
2019
$million
2018
$million
2019
$million
2018
$million
2019
$million
2018
$million
Financial liabilities
Payables
Interest bearing liabilities
14
324.4
–
324.4
293.3
–
293.3
6.3
–
6.3
17.8
–
17.8
–
–
–
–
950.0
950.0
330.7
–
330.7
311.1
950.0
1,261.1
104 104
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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.
17. 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 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
Issued during the FY19 financial year
Shares issued on vesting of unlisted performance rights
Repayment of employee loans and sale of employee shares
Issued and fully paid ordinary shares at 30 June 2019
Number of
Shares
1,873,812,484
1,213,891
401,543,843
–
2,276,570,218
1,678,886
–
2,278,249,104
$million
1,558.5
–
297.3
3.3
1,859.1
–
1.5
1,860.6
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 18 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 nil (FY18: 25.9%). 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.
ANNUAL REPORT 2019 105
ANNUAL REPORT 2019 105
FULL YEAR REPORTBEACH ENERGY LIMITED 18. 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 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
Foreign currency translation reserve
Profit distribution reserve
Hedging reserve
Total reserves
Consolidated
2019
$million
2018
$million
32.8
8.3
126.8
–
167.9
30.6
17.4
172.4
(10.1)
210.3
19. 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 (2018: 1.0 cent)
Interim dividend of 1.0 cent (2018: 1.0 cent)
Total dividends paid or payable
Franking credits available in subsequent financial years based on a tax rate of 30% (2018 – 30%)
20. Subsidiaries
Name of Company
Place of incorporation
Beach Energy Limited (1)
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 (2)
Beach (Tanzania) Pty Ltd
Beach Petroleum (Tanzania) Limited
South Australia
South Australia
New South Wales
South Australia
Victoria
Romania
Victoria
Tanzania
Consolidated
2019
$million
2018
$million
22.8
22.8
45.6
142.2
18.7
22.8
41.5
47.5
Percentage of shares held
%
2019
100
100
100
100
–
100
100
%
2018
100
100
100
100
100
100
100
106 106
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Name of Company
Beach (USA) Inc (2)
Beach Petroleum (NT) Pty Ltd
Territory Oil & Gas Pty Ltd
Adelaide Energy Pty Ltd
Australian Unconventional Gas Pty Ltd
Deka ResourcePty Ltd
Well Traced Pty Ltd
Australian Petroleum Investments Pty Ltd(1)
Delhi Holdings Pty Ltd
Delhi Petroleum Pty Ltd(1)
Impress Energy Pty Ltd(1)
Impress (Cooper Basin) Pty Ltd(1)
Springfield Oil and Gas Pty Ltd(1)
Mazeley Ltd
Mawson Petroleum Pty Ltd
Claremont Petroleum (PNG) Ltd (2)
Drillsearch Energy Pty Ltd (1)
Circumpacific Energy (Australia) Pty Ltd
Drillsearch Gas Pty Ltd
Drillsearch (Field Ops) Pty Ltd
Drillsearch Energy (PNG) Ltd (2)
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)
Lattice Energy Limited(1)
Lattice Energy Resources (Perth Basin) Pty Ltd(1)
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
Beach Energy Resources NZ (Kupe) Limited
Beach Energy (Kupe) Limited
Kupe Mining (No.1) Limited
Beach Energy Resources NZ (Tawn) Limited
Lattice Energy Resources (Otway) Limited
Place of incorporation
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
Papua New Guinea
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
All shares held are ordinary shares, other than Mazeley Ltd which is held by a bearer share.
(1) Company in Closed Group in FY18 and FY19 (refer Note 21).
(2) Company liquidated and deregistered/dissolved during FY19.
Percentage of shares held
%
2019
%
2018
–
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
ANNUAL REPORT 2019 107
ANNUAL REPORT 2019 107
FULL YEAR REPORTBEACH ENERGY LIMITED
21. 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 20.
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
Revenue
Cost of sales
Gross profit
Other income
Other expenses
Operating profit before financing costs
Interest income
Finance expenses
Profit before income tax expense
Income tax 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
Dividends paid to shareholders
Retained earnings/(accumulated losses) at end of the year
Closed Group
2019
$million
2018
$million
1,861.2
(1,069.0)
792.2
89.7
(256.4)
625.5
2.9
(67.5)
560.9
(179.4)
381.5
–
14.4
(4.3)
10.1
391.6
(309.1)
381.5
–
72.4
1,160.9
(714.4)
446.5
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
(307.9)
40.3
(41.5)
(309.1)
108 108
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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
Other property, plant and equipment
Petroleum assets
Exploration and evaluation assets
Goodwill
Deferred tax assets
Other financial assets
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Current tax liability
Derivative financial instruments
Contract liabilities
Liabilities held for sale
Total current liabilities
Non-current liabilities
Payables
Provisions
Contract liabilities
Interest bearing liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings/(accumulated losses)
Total equity
Closed Group
2019
$million
2018
$million
75.0
306.1
89.5
–
20.8
6.8
498.2
26.9
2,438.0
226.0
57.1
91.8
183.8
3,023.6
3,521.8
234.4
16.1
172.7
–
57.6
1.5
482.3
247.1
666.0
33.8
–
946.9
1,429.2
2,092.6
1,860.6
159.6
72.4
2,092.6
193.5
265.5
90.4
19.0
6.4
21.2
596.0
5.5
2,426.2
357.3
37.2
83.2
372.1
3,281.5
3,877.5
263.4
20.9
81.3
47.0
–
–
412.6
152.5
643.8
–
925.7
1,722.0
2,134.6
1,742.9
1,859.1
192.9
(309.1)
1,742.9
ANNUAL REPORT 2019 109
ANNUAL REPORT 2019 109
FULL YEAR REPORTBEACH ENERGY LIMITED 22. Parent entity financial information
Selected financial information of the parent entity, Beach Energy Limited, is set out below:
Financial performance
Net loss after tax
Other comprehensive income/(loss), net of tax
Total comprehensive loss after tax
Total current assets(1)
Total assets
Total current liabilities(1)
Total liabilities
Issued capital
Share based payments reserve
Profits distribution reserve
Hedging reserve
Retained earnings
Total equity
Parent
2019
$million
(273.8)
10.1
(263.7)
528.4
2,459.5
1,518.0
1,588.1
1,860.6
32.7
126.9
–
(1,148.8)
871.4
2018
$million
(38.2)
(14.9)
(53.1)
449.2
2,639.5
496.2
1,463.4
1,859.1
30.6
172.4
(10.1)
(875.9)
1,176.1
(1) Includes reclassification in FY18 of intercompany loans ($295 million) from current assets to current liabilities.
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
Parent
2019
$million
2018
$million
9.8
7.2
44.6
0.4
14.2
0.2
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 26.
Beach Energy Limited and a number of its wholly owned subsidiaries are parties to a Deed of Cross Guarantee as disclosed in Note 21.
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.
110 110
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 23. 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 20.
Consolidated
2019
$
6,261,695
2,007,754
41,278
2018
$
7,020,807
1,778,536
(28,649)
8,310,727
8,770,694
Transactions with other related parties
During the financial year ended 30 June 2019, Beach used the legal services of DMAW Lawyers, a legal firm of which the Chairman,
Mr Davis is a principal. Beach paid $64,861 during the financial year (FY18: $48,231) to DMAW lawyers for legal services. Directors
fees payable to Mr Davis for the year ended 30 June 2019 of $275,000 (FY18: $275,000) were also paid directly to DMAW Lawyers.
During the current financial year Beach paid US$1,199,933 (FY18: US$1,973,472) to Central Petroleum Mereenie Pty Ltd, an entity of
which director, Peter Moore was also a director, for the purchase of crude oil on commercial terms. Peter Moore ceased to be a director
of Central Petroleum Mereenie Pty Ltd on 13 November 2018. Beach also paid $179,782 (FY18: $227,905) to Coates Hire Operations Pty Ltd,
an entity of which Ryan Stokes and Richard Richards are also directors, for the hire of equipment on arms length commercial terms.
In FY18, 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 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.
24. Disposal group held for sale
On 31 May 2019, Beach announced it had completed the sale of 40% of Beach’s Victorian Otway assets to O.G. Energy Holdings Ltd.
(O.G. Energy). The Otway assets includes the Otway Gas Plant, existing gas field Geographe, Thylacine, Halladale, Speculant and Black
Watch as well as exploration prospects Enterprise and Artisan. In each joint venture Beach (or its wholly owned subsidiaries) will hold
a 60% interest and remain as operator, whilst O.G. Energy will hold 40%. Beach received cash consideration of $262.4 million on
completion comprising the sale price of $344.0 million less completion adjustments of $81.6 million reflecting O.G. Energy’s share of
net cashflow from these assets between the effective date of the transaction being 1 July 2018 and the completion date. A receivable of
$2.2m was booked at 30 June 2019 comprising a final completion adjustment of $0.2m and a further amount for income tax payable by
the purchaser of $2.0m relating to earnings made during the interim period.
Profit on sale
Cash consideration
Completion adjustments
Receivables
Total consideration received
Less assets and liabilities disposed
– Assets held for sale
– Liabilities held for sale
Net assets disposed
Profit on sale
Cash flow on disposal
Cash consideration
Completion adjustment
Net cash flow on disposal
$million
344.0
(81.6)
2.2
264.6
410.6
(158.9)
251.7
12.9
344.0
(81.6)
262.4
ANNUAL REPORT 2019 111
ANNUAL REPORT 2019 111
FULL YEAR REPORTBEACH ENERGY LIMITED 24. Disposal group held for sale continued
On 3 July 2019, Beach announced that it has executed agreements with AWE (Beharra Springs) Pty Ltd, a related body corporate of
Mitsui E&P Australia (MEPAU), to move to 50:50 ownership of production licences L11 and L22 (Beharra Springs), exploration permit EP
320 and pipeline licence PL 18 in the Perth Basin. The previous ownership structure for these permits was Beach 67% and MEPAU 33%.
Beach will retain operatorship of the permits. The transaction has an effective date of 1 January 2019 and is expected to be completed
during Q1 FY20, subject to satisfaction of various conditions including regulatory approval. The interest being held for sale is part of the
SAWA operating segment with assets and liabilities held for sale shown at historic cost.
Beach Petroleum (CEE) s.r.l, a wholly owned Romanian subsidiary, was liquidated during the year resulting in the release of a cumulative
gain of $7.0 million on the historic translation of this entity from other comprehensive income to the statement of profit or loss.
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 was completed at the end of January 2019 which along with other joint venture
interests sold during FY19 resulted in a gain of $0.6 million.
Assets and liabilities of disposal groups held for sale
Bonaparte
Perth Basin
Corporate
Total
Jun 2019
$million
Jun 2018
$million
Jun 2019
$million
Jun 2018
$million
Jun 2019
$million
Jun 2018
$million
Jun 2019
$million
Jun 2018
$million
Property, plant and
equipment
Petroleum assets
Exploration
Assets held for sale
Provisions
Liabilities held for sale
–
–
–
–
–
–
–
–
–
–
2.6
2.6
3.9
1.3
1.5
6.7
1.5
1.5
–
–
–
–
–
–
–
–
–
–
–
–
21.2
–
–
21.2
–
–
3.9
1.3
1.5
6.7
1.5
1.5
21.2
–
–
21.2
2.6
2.6
25. 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 previous 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%.
112 112
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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. The provisional acquisition entries booked
in FY18 have been further adjusted in the current financial year as shown below following a further detailed review of the assets and
liabilities acquired. The impact of these changes on both the prior year and current year is not material.
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
– Other non-current assets
– Deferred tax assets
– Petroleum assets
– Exploration and evaluation assets
– Current payables
– Other current liabilities
– Current provisions
– Non-current payables
– Other non-current liabilities
– Restoration liabilities
– Deferred tax liabilities
– Other non-current provisions
Net assets
Cash consideration
Less cash acquired on acquisition
Net cashflow on acquisition
Provisional
$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
Final
$million
1,532.0
1,474.9
57.1
79.0
93.8
57.7
17.8
66.6
1.5
1,775.5
435.0
(163.6)
(100.3)
(17.6)
(46.6)
(160.3)
(501.2)
(57.1)
(5.3)
1,474.9
(1,532.0)
79.0
(1,453.0)
(1,532.0)
79.0
(1,453.0)
The Statement of Profit or Loss includes integration costs incurred during the period of $1.6 million (FY18 $50.1 million) for both
acquisitions. 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.
ANNUAL REPORT 2019 113
ANNUAL REPORT 2019 113
FULL YEAR REPORTBEACH ENERGY LIMITED Other information
Additional information required to be disclosed under Australian Accounting Standards.
26. 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 2019 under the service agreements for the other executive officers is $1,964,450
(FY18 $1,761,500).
Bank guarantees
As at 30 June 2019, Beach has been provided with a $75 million letter of credit facility, of which $61.9 million had been utilised by way
of bank guarantees or letters of credit as security predominantly for our environmental obligations and work programs (refer Note 14 for
further details on the corporate debt 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.
Legal proceedings and claims
The Group may be involved in various legal proceedings and claims in the ordinary course of business, including contractual, third party,
contractor and regulatory claims. While the outcome of these legal proceedings and claims cannot be predicted with certainty, it is the
directors’ opinion that as of the date of this report, it is unlikely these claims will have a material adverse impact on the Group.
114 114
Notes to the Financial StatementsNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 27. 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 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 Ernst & Young for:
– transaction services for Lattice acquisition
– other assurance services
Total other services
Consolidated
2019
$000
2018
$000
1,275
135
94
1,504
–
–
17
1,521
80
91
171
768
115
62
945
100
59
23
1,127
1,475
51
1,526
28. Subsequent events
On 3 July 2019, Beach announced that it has executed agreements with AWE (Beharra Springs) Pty Ltd, a related body corporate of
Mitsui E&P Australia (MEPAU), to move to 50:50 ownership of production licences L11 and L22 (Beharra Springs), exploration permit
EP 320 and pipeline licence PL 18 in the Perth Basin. The previous ownership structure for these permits was Beach 67% and MEPAU
33%. Beach will retain operatorship of the permits. The transaction has an effective date of 1 January 2019 and is expected to be
completed during Q1 FY20, subject to satisfaction of various conditions including regulatory approval.
Other than the matters described above, there has not arisen in the interval between 30 June 2019 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 2019 115
ANNUAL REPORT 2019 115
FULL YEAR REPORTBEACH ENERGY LIMITED 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 2019, 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)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2019 and of its consolidated financial performance for the year ended on that date; and
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
116 116
1. Carrying value of petroleum assets
Why significant
How our audit addressed the key audit matter
At 30 June 2019 the Group had petroleum
assets of $2,727 million.
Australian Accounting Standards require the
Group to assess throughout the reporting period
whether there is any indication that an asset may
be impaired or a previous impairment reversed.
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 impairment reversal for any of its
Cash Generating Units (CGUs). As a result, no
impairments or impairment reversals were
recorded 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 impacted 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 these items
are set out in the financial report in note 9.
In completing our audit procedures, we:
• Assessed the Group’s definition of cash
generating units in accordance with Australian
Accounting Standards.
• Evaluated the assumptions, methodologies and
conclusions used by the Group in assessing for
indicators of impairment and impairment
reversal, in particular, those relating to the
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 forecast 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
ANNUAL REPORT 2019 117
ANNUAL REPORT 2019 117
FULL YEAR REPORTBEACH ENERGY LIMITED
Independent Auditor’s Report
2. Impairment assessment of capitalised exploration and evaluation expenditure
Why significant
How our audit addressed the key audit matter
As at 30 June 2019 the Group had exploration
and evaluation assets of $355 million.
We evaluated the Group’s assessment of the carrying
value of exploration and evaluation assets. In
obtaining sufficient audit evidence, we:
The carrying value of exploration and evaluation
assets is subjective based on the Group’s ability
and intention, to continue to explore the assets.
The carrying value may also be impacted by the
results of exploration work indicating that the oil
and gas resources may not be commercially
viable for extraction. The Group is required to
assess whether any indicators of impairment are
present.
Given the size of the balance 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.
• 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 petroleum
assets. This included assessment of the
Group’s budgets and enquiries with senior
management and directors as to the
intentions and strategy of the Group.
• Assessed the carrying value of exploration
and evaluation assets where recent
exploration activity, in a given licensed area,
provided negative indicators as to the
recoverability of amounts capitalised.
• Considered the commercial viability of
results relating to exploration and evaluation
activities carried out in the relevant licensed
areas.
• Assessed the Group’s ability to finance any
planned future exploration and evaluation
activity.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
118 118
3. Provisionally priced oil revenue
Why significant
How our audit addressed the key audit matter
At 30 June 2019 the group recorded $94.5
million of provisionally priced oil revenue (30
June 2018: $80.4 million), which represents a
significant portion (12%) of total annual oil
revenue (30 June 2018: 15%).
In accordance with contractual terms within the
Crude Oil Sale and Purchase Agreement
(‘COSPA’), risk and title of oil produced in the
Cooper Basin is transferred to the South
Australian Cooper Basin Joint Venture
(“SACBJV”), when the oil reaches the Moomba
processing facility. The supply of oil to the
Moomba processing facility is the point the
Group satisfies its performance obligation to the
SACBJV in respect of the supply of oil. Revenue
is calculated using forecast oil prices when title
has passed, with actual invoices not raised until
the oil has shipped from Port Bonython.
Given the complexity in calculating volume of oil
supplied and judgement in the application of the
estimated transaction price, there can be
significant variations in the final revenue value
recorded on invoicing.
Disclosure regarding this matter can be found in
Note 2 to the financial report.
In completing our audit procedures, we:
• Assessed the point and recognition of
revenue with reference to executed
contracts between the parties and the
requirements of Australian Accounting
Standards.
• Obtained directly from the SACBJV an
independent confirmation of the barrels of oil
received at the Moomba processing facility,
but not yet shipped via Port Bonython.
•
For all provisionally priced revenue barrels
sold, assessed the estimated sales price
applied by the Group to forward commodity
price assumptions together with estimates of
quality premiums and exchange rates for the
period in which settlement is likely to occur
with reference to contractual arrangements
and Brent oil price futures.
• Selected shipments which occurred close to
the period end assessed whether revenue
was recorded in the correct period.
• Selected and examined subsequent cash
receipts.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
ANNUAL REPORT 2019 119
ANNUAL REPORT 2019 119
FULL YEAR REPORTBEACH ENERGY LIMITED
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 annual report, but does not include the financial report and our auditor’s
report thereon.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
120 120
•
•
•
•
•
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 58 to 72 of the directors' report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Beach Energy Limited for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
ANNUAL REPORT 2019 121
ANNUAL REPORT 2019 121
FULL YEAR REPORTBEACH ENERGY LIMITED
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
19 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
122 122
Glossary of terms
A$ or $
2C
3D
1P
2P
3P
Australian dollars
Contingent resource best estimate (1)
Three dimensional
Proved reserve estimate (1)
Proved and probable reserve estimate (1)
Proved, probable and possible reserve
estimate (1)
Australian Accounting Standards Board
AASB
Annual General Meeting
AGM
Area of interest
AOI
Australian Securities Exchange
ASX
Authority to Prospect
ATP
Adelaide Brighton Adelaide Brighton Cement Ltd, a wholly
Alinta Energy
BassGas Project
bbl
Bcf
Beach
Beharra Springs
owned subsidiary of Adelaide Brighton Limited
(ASX: ABC)
Alinta Energy Retail Sales Pty Ltd
The BassGas Project (Beach 53.75% and
operator, MEPAU 35%, Prize Petroleum
International 11.25%), produces gas from the
offshore Yolla gas field in the Bass Basin in
production licence T/L1. Beach also holds a
50.25% operated interest in licenses TR/L2,
TR/L3, TR/L4 and TR/L5
Barrels
Billion cubic feet
Beach Energy Limited and its subsidiaries
Beharra Springs (Beach 67% and operator,
Mitsui 33%, pending completion of a 17% sell
down described in ASX Release 018/19 dated
3 July 2019) produces gas from the onshore
Beharra Springs gas field in the Perth Basin in
production licences L11 and L22
Boe
Benaris interests Refers to 27.77% of OGP, acquired by Lattice,
as announced by Origin on 11 September 2017
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 of Directors of Beach
Bridgeport (Cooper Basin) Pty Ltd
Compounded annual growth rate
Cased and suspended
Cash generating unit
Congony-Kalladeina-Sceale field complex
Beach and its subsidiaries
Cooper Energy Ltd and its subsidiaries
Includes both Cooper and Eromanga Basins
Board
Bridgeport
CAGR
C&S
CGU
CKS
Company
Cooper Energy
Cooper Basin
Cooper Basin JV The Santos operated, SACB JVs and SWQ JVs
ADDITIONAL INFORMATION
EBITDA
EIP
EP
EPC
EPS
Ex PEL 91
Ex PEL 92
Ex PEL 104 / 111
Ex PEL 106
Ex PEL 513
Ex PEL 632
FEED
FID
Free cash flow
FY(19)
Genesis
Group
GSA
GJ
HBWS
H(1) (FY19)
IFRS
kbbl
kboe
km
KMP
KPI
kt
Kupe
Lattice
LNG
LPG
LTI
MEPAU
MMbbl
MMboe
MMscf
MMscfd
Earnings before interest, tax, depreciation and
amortisation
Executive Incentive Plan
Exploration Permit
Engineering, Procurement and Construction
Earnings per share
PRLs 151 to 172 and various production licences
PRLs 85 to 104 and various production licences
PRLs 136 to 150 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
Front End Engineering Design
Final Investment Decision
Operating cash flow less investing cash flow
(excluding acquisitions and divestitures)
Financial year ended 30 June (2019)
Genesis Energy Limited and its subsidiaries
Beach and its subsidiaries
Gas sales agreement
Gigajoule
Halladale, Black Watch and Speculant offshore
gas fields in the Victorian Otway Basin
(First) half year period (of FY19)
International Financial Reporting Standards
Thousand barrels of oil
Thousand barrels of oil equivalent
Kilometre
Key management personnel
Key performance indicator
Thousand tonnes
Kupe Gas Project (Beach 50% and operator,
Genesis 46%, NZOG 4%) produces gas from
the offshore Kupe gas field in the Taranaki Basin
in licence PML38146
Lattice Energy Limited
Liquefied natural gas
Liquefied petroleum gas
Long term incentive
Mitsui E&P Australia
Million barrels of oil
Million barrels of oil equivalent
Million standard cubic feet of gas
Million standard cubic feet of gas per day
ANNUAL REPORT 2019 123
ANNUAL REPORT 2019 123
BEACH ENERGY LIMITED Tcf
TCFD
TFR
TJ
TJ/d
Toyota Tsusho
interests
TRIFR
TSR
US$
Waitsia
Trillion cubic feet
Task Force on Climate Related Financial
Disclosures
Total fixed remuneration
Terajoule
Terajoules per day
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 dollars
Waitsia Gas Project (Beach 50%, MEPAU 50%
and operator) produces gas from the onshore
Waitsia gas field in the Perth Basin in licence
L1/L2.
(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.
Glossary of terms
The ratio of net debt/(cash) to the sum of net
debt/(cash) and total book equity
Net profit after tax
New Zealand
New Zealand Oil & Gas Limited and its
subsidiaries
O.G. Energy Holdings Limited, a member of the
Ofer Global group of companies
Origin Energy Limited and its subsidiaries
Otway Gas Project. Offshore gas fields
Thylacine and Geographe, the Thylacine Well
Head Platform, Otway Gas Plant and associated
infrastructure in the Victorian Otway Basin
Other Cooper Basin producing areas are ATP
299 (Tintaburra) (Beach 40%), ex PEL 513/632
(Beach 40%) and PRL 135 (Vanessa) (Beach
43%), all non-operated
Sale of 40% of Beach’s Victorian Otway
interests to O.G. Energy
The South Australian Plan for Accelerating
Exploration gas grant scheme
Plugged and abandoned
Prior corresponding period
Petroleum Exploration Licence
Petroleum Exploration Permit
Petroleum Lease
Petroleum Production Licence
Petajoule
Petroleum Retention Licence (SA)
Petroleum Resources Management System
Petroleum Resource Rent Tax
(First) quarter (FY19)
Return on capital
Rockhopper Exploration plc
South Australian Cooper Basin Joint Ventures,
which include the Fixed Factor Area (Beach
33.4%, Santos 66.6%) and the Patchawarra
East Block (Beach 27.68%, Santos 72.32%)
Santos Limited and its subsidiaries
Beach’s South Australia Western Australia
reporting segment
Senex Energy Limited
Seven Group Holdings Limited
Society of Petroleum Engineers
Short term incentive
South West Queensland Joint Ventures,
incorporating various equity interests
(Beach 30-52.2%)
Net Gearing
NPAT
NZ
NZOG
O.G. Energy
Origin
OGP
Other Cooper
Basin production
Otway Sale
PACE
P&A
PCP
PEL
PEP
PL
PPL
PJ
PRL
PRMS
PRRT
Q(1) (FY19)
ROC
Rockhopper
SACB JVs
Santos
SAWA
Senex
SGH
SPE
STI
SWQ JVs
124 124
Schedule of Tenements
FOR THE YEAR ENDED 30 JUNE 2019
Cooper/Eromanga – Queensland
Subsidiary
Company
Maw 6.50%
Delhi 32%
Delhi 22.5%
LEL 25%
Delhi 20%
LEL 25%
Delhi 25.2%
LEL 27%
Delhi
Delhi
Delhi 28.8%
LEL 10%
Delhi
Delhi 23.2%
LEL 16.7375%
Circumpacific
Tenement
ATP 1189 ex ATP 259
(Naccowlah Block) 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)
SWQ Gas Unit 8
ATP 940
Cooper/Eromanga – South Australia
Subsidiary
Company
Tenement
BPT
BPT
BPT
BPT 40%
DLS 30%
GAOG 30%
BPT
BPT
BPT 50%
GAOG 50%
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
BPT
BPT
BPT
BPT
PPL 204 (Sellicks Oil Field)
PPL 205 (Christies Oil Field)
PPL 210 (Aldinga Oil Field)
PPL 212 (Kiana Oil Field)
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)
PPL 245 (Butlers Oil Field)
PPL 246 (Germein Oil Field)
PPL 247 (Perlubie Oil Field)
PPL 248 (Rincon Oil Field)
ADDITIONAL INFORMATION
Subsidiary
Company
Tenement
%
38.5%
47.5%
45%
52.2%
30%
30%
38.8%
40%
39.9375%
100%
%
75%
75%
50%
100%
75%
75%
100%
40%
40%
40%
75%
75%
75%
75%
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%
BPT 40%
GAOG 60%
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
BPT 40%
GAOG 60%
BPT 40%
GAOG 60%
BPT
BPT
BPT
BPT
Acer
Acer
Springfield 15%
Impress (CB) 25%
Springfield 15%
Impress (CB) 25%
BPT 50%
GAOG 50%
BPT 50%
GAOG 50%
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)
PPL 260 (Stunsail Oil Field)
PPL 261 (Pennington Oil Field)
PPL 262 (Balgowan Oil Field)
%
75%
75%
100%
100%
100%
100%
100%
40%
100%
100%
100%
PPL 263 (Martlett North Oil Field)
40%
PPL 264 (Martlett Oil Field)
PPL 265 (Marauder Oil Field)
ex PEL 91 9
GSEL 648 (ex PEL 91)
ex PEL 92 10
GSEL 634 (ex PEL 92)
PEL 94
PEL 95
ex PEL 101 11
GSEL 652 (ex PEL 101) 11
ex PEL 104 14
PRL 15 (Growler Block)
ex PEL 106 12
GSEL 646 (ex PEL 106) 12
40%
40%
100%
100%
75%
75%
50%
50%
100%
80%
40%
40%
100%
100%
ANNUAL REPORT 2019 125
ANNUAL REPORT 2019 125
BEACH ENERGY LIMITED Tenement
ex PEL 107 13
%
100%
GSEL 653 (ex PEL 107) 13
100%
Arrowie – South Australia
Subsidiary
Company
BPT
Tenement
GEL 156
Otway – Victoria
ex PEL 111 14
PEL 182
ex PEL 182 15
ex PEL 218 (Permian) 16
ex PEL 513 17
PEL 570
PEL 630
ex PEL 632 18
Reg Sprigg West Unit 26
40%
43%
43%
100%
40%
47.5%
50%
40%
20.759%
Subsidiary
Company
BPT
BPT
LEL
LEL
LEL 55%
LEROL 5%
LEL
LEL
BPT
Tenement
PPL 6 (McIntee Gas Field)
PPL 9 (Lavers Gas Field)
Vic/P42(V) 21
Vic/P43 21
Vic/L23 22
Vic/L1(V) 21
Vic/P73
PEP 168
%
21%
%
10%
10%
60%
60%
60%
60%
60%
50%
%
7.34%
%
50%
5.75%
%
100%
60%
60%
Browse – Western Australia
Subsidiary
Company
BPT
Tenement
WA–80–R
Bonaparte Basin – Western Australia
Subsidiary
Company
LEL
LERBPL
Tenement
WA–454–P
WA–6–R (West Petrel)
Otway (Offshore) – Tasmania
Subsidiary
Company
LEL
LEL 55%
LEROL 5%
LEL 55%
LEROL 5%
Tenement
T/30P
T/L2 (Thylacine) 22
T/L3 (Thylacine South) 22
Schedule of Tenements
FOR THE YEAR ENDED 30 JUNE 2019
Subsidiary
Company
BPT 40%
DLS 20%
GAOG 40%
BPT 40%
DLS 20%
GAOG 40%
Springfield 15%
Impress (CB) 25%
Acer
Acer
BPT
DLS (513)
Ambassador
BPT
GAOG
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%
PRL 26 (Udacha Unit)
100%
GSEL 645 (ex Udacha Unit)
100%
Patchawarra East 19
Fixed Factor Agreement 20
SA Unit 27
27.676%
20.21%
33.4%
%
70%
70%
100%
100%
100%
100%
100%
100%
70%
100%
Otway – South Australia
Subsidiary
Company
Tenement
PEL 494
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
ADE
ADE
ADE
ADE
ADE
ADE
ADE
ADE
ADE
ADE
126 126
ADDITIONAL INFORMATION
Bass Basin – Tasmania
Canterbury – New Zealand
Subsidiary
Company
BPT (NZ)
BERNZHL
Tenement
PEP 52717
PEP 38264
Northern Taranaki Graben – New Zealand
Subsidiary
Company
BPT (NZ)
Tenement
PEP 57080
Taranaki Basin – New Zealand
Subsidiary
Company
BERNZKL
Kupe Mining No.1
Ltd
Tenement
PML 38146 (Kupe)
%
50%
37.5%25
%
50%
%
50%
Subsidiary
Company
LEL 37.5%
LERBGL 5%
BPT 11.25%
LEL 39%
BPT 11.25%
LEL 39%
BPT 11.25%
LEL 39%
BPT 11.25%
LEL 39%
BPT 11.25%
Tenement
T/L1 (Yolla)
TR/L2
TR/L3
TR/L4
TR/L5
Carnarvon – Western Australia
Subsidiary
Company
BPT
Tenement
WA–359–P
Perth Basin – Western Australia
Subsidiary
Company
LERPBPL
LERPBPL
LERPBPL
Tenement
EP 320 23
L11/L22 (Beharra Springs) 24
L1/L2 (Waitsia Excluding Dongara,
Mondarra and Yardarino)
Bonaparte – Northern Territory
Subsidiary
Company
LEL
LEL
LEL
LERBPL
Tenement
NT/P82
NT/P84
NT/P85
NT/RL1
%
53.75%
50.25%
50.25%
50.25%
50.25%
%
21%
%
50%
50%
50%
%
50.00%
50.00%
50.00%
5.75%
ANNUAL REPORT 2019 127
ANNUAL REPORT 2019 127
BEACH ENERGY LIMITED Schedule of Tenements
FOR THE YEAR ENDED 30 JUNE 2019
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 and PCAs 251, 269, 271.
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 and PCA 276.
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 and PCA 248.
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 and PCAs
270, 278, 281, 282, 283.
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 and PCAs 252, 253, 254, 275, 279, 280.
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 and PCAs 250, 268, 272, 273, 274, 277.
8. 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.
9. 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.
10. 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.
11. ex PEL 101 consists of PRLs 173 and 174.
12. ex PEL 106 consists of PRLs 129 and 130.
13. ex PEL 107 consists of PRLs 175, 176, 177, 178 and 179.
14. ex PEL 104/111 consists of PRLs 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149 and 150.
15. ex PEL 182 consists of PRLs 135, 238, 239, 240, 241, 242, 243 and 244.
16. 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.
17. ex PEL 513 consists of PRLs 191 to 206.
18. ex PEL 632 consists of PRLs 131, 132, 133 and 134.
19. 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.
20. 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.
21. VIC/P42(V), VIC/P43, VIC/L1(V), VIC/P73. Registered interest is 100%. Assignment of 40% subject to regulatory approval.
22. T/L2, T/L3, VIC/L23. Registered interest is 100%. Assignment of 40% subject to regulatory approval.
23. EP 320. Registered interest is 67%. Assignment of 17% subject to regulatory approval.
24. Beharra Springs (L11 and L22). Registered interest is 67%. Assignment of 17% subject to regulatory approval.
25. PEP 38264. Registered interest is 65%. Assignment of 27.5% subject to regulatory approval.
26. The Reg Sprigg West Unit is a unitisation arrangement which includes part of PPL 194 (Patchawarra East).
27. The SA Unit consists of discoveries in the Fixed Factor Agreement Area.
128 128
ADDITIONAL INFORMATION
Subsidiary Company
Acer
Ambassador
ADE
AUG
BPT (NT)
BPT (NZ)
BPT
Circumpacific
Deka
Delhi
DLS (513)
DLS
DLS Gas
GAOG
Impress (CB)
LEL
LERBPL
LEROL
LERPBPL
BERNZKL
BERNZHL
LERBGL
Maw
Springfield
TOAG
Well Traced
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 Energy (Australia) Pty Ltd
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
L 22, PCAs, VIC/P73
Tenements Divested
PPL 4, 5, 7, 10, 12, VIC/P69, EP 126, ex PEL 218 (Post Permian), GSEL 633, PEL 87, PEL 424, PEL 103, GSEL 659, PEL 103 (A), GSEL 660
ANNUAL REPORT 2019 129
ANNUAL REPORT 2019 129
BEACH ENERGY LIMITED Shareholder information
Share details – Distribution as at 1 August 2019
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
5,394
7,891
3,927
6,015
486
23,713
1,980
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 August 2019
Name
Seven Group Holdings Limited and others
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); Mr Kerry Stokes AC and Kemast Investments Pty Ltd
Number of
voting shares
held
Date of notice
650,554,052
15 November 2018
650,554,052
15 November 2018
130 130
ADDITIONAL INFORMATION
Twenty largest shareholders as at 1 August 2019
Rank
Name
Fully paid
ordinary shares
% of Units
NETWORK INVESTMENT HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
NETWORK INVESTMENT HOLDINGS PTY LTD
UBS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
NETWORK INVESTMENT HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
NETWORK INVESTMENT HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR ROBERT LEE PETERSEN
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
AMP LIFE LIMITED
AYERSLAND PTY LTD
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
BNP PARIBAS NOMS PTY LTD
MR LEENDERT HOEKSEMA + MRS AALTJE HOEKSEMA
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Top 20 holders of fully paid ordinary shares
Remaining Holders Balance
Total
556,667,776
495,955,897
327,912,748
217,202,315
110,332,974
40,669,419
34,127,698
26,843,311
23,497,527
18,742,950
15,345,401
14,172,317
12,717,204
8,515,117
7,581,044
7,382,222
4,870,000
3,838,535
3,480,867
2,800,000
1,932,655,322
346,273,006
2,278,928,328
24.43
21.76
14.39
9.53
4.84
1.78
1.50
1.18
1.03
0.82
0.67
0.62
0.56
0.37
0.33
0.32
0.21
0.17
0.15
0.12
84.81
15.19
100
ANNUAL REPORT 2019 131
ANNUAL REPORT 2019 131
BEACH ENERGY LIMITED Corporate Information
Annual meeting
The annual meeting will be held as follows:
Place
ADELAIDE CONVENTION CENTRE
NORTH TCE, ADELAIDE SA 5000
Date
TUESDAY 26 NOVEMBER 2019
Time
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
Matthew Kay
BEc, MBA, FCPA, GAICD
Managing Director
Sally-Anne Layman
B Eng (Mining) Hon, B Com, CPA, MAICD
Independent non-executive
Peter Stanley Moore
PhD, BSc (Hons), MBA, GAICD
Independent non-executive
Joycelyn Cheryl Morton
BEc, FCA, FCPA, FIPA, FCIS, FAICD
Independent non-executive
Richard Joseph Richards
BComs/Law (Hons), LLM, MAppFin
Non-executive
Ryan Kerry Stokes
BComm, FAIM
Non-executive
132 132
Company Secretary
Peter Kupniewski
LL.B/LP
Registered Office
Level 8, 80 Flinders Street
ADELAIDE SA 5000
Telephone:
Facsimile:
Email: info@beachenergy.com.au
(08) 8338 2833
(08) 8338 2336
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
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