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The financial tides of Beach Energy

Beach Energy (ASX:BPT) has flagged more asset impairments for the year to June 30, with the total bill topping $1.1 billion.

These write-downs are in addition to the cost of cutting 30% of the company’s workforce earlier this year after a new CEO, Brett Woods, took the reins at the company, which is 30% controlled by Kerry Stokes’ Seven Group Holdings.

The latest impairments mean Beach is heading for a very large loss when it closes its books later this month.

In a surprise announcement to the ASX on Tuesday, 19 days before its June 30 balance date, Beach revealed that it would be adding another $365 to $400 million to its impairment bill for 2023-24.

The company said the latest write-downs would be made against assets in the Taranaki basin in NZ ($115-$125 million) and in Bass Strait ($250-$275 million). In short, both assets failed to confirm the potential expected in testing and pre-production.

Tuesday’s write-downs come after the company revealed non-cash impairment charges of $721 million ($505 million after tax) in February for its Cooper Basin producing assets and various exploration assets.

Beach said the final figure for the latest set of write-downs will be announced with the full-year results in August after audit and board approvals.

All up, the gross amount will be around $1.12 billion, though the after-tax figure would be just under $800 million.

In the statement to the ASX, Beach explained that the write-down in the Taranaki assets followed weak flow rates in “an eastern area of the Kupe field.”

“The well delivered at low gas flow rates after connection to the Kupe Gas Plant. Well intervention activities did not improve the gas flow rate. The results confirmed that production from the existing wells has drained gas from this eastern area, leading to a reduction in expected recovery.

“A reserves revision will be included in Beach’s 30 June 2024 Reserves and Resources Statement.

“The reserves revision is expected to result in a non-cash impairment charge to the carrying value of Beach’s Taranaki Basin assets of approximately $115-$125 million before tax,” Beach told the ASX.

The write-down in the Bass Basin followed a strategic review that “determined that development of the Bass Basin discoveries (Trefoil, Bass, White Ibis, and Yolla West) will not utilize any optional slots as part of the upcoming Offshore Gas Victoria drilling program as they do not meet minimum investment requirements.”

“As a result, development planning on these opportunities has ceased. Alternate usage for Beach’s Bass Basin infrastructure will be investigated in parallel with restoration planning.

“As a result of the decision not to invest in a Bass Basin development at this time, Beach expects to recognize a non-cash impairment charge to the carrying value of Beach’s Bass Basin assets of approximately $250-$275 million before tax,” Beach concluded.

Beach releases its 2023-24 full-year results and reserves statement on August 12.

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