What to Do with Beach Energy Now

Dear Reader,

As you’re no doubt aware, late last week Beach Energy Ltd [ASX:BPT] announced a downgrade of reserves and production from its Western Flank oil assets in the Cooper Basin.

The purpose of this update is to give you some guidance as to what to do now.

I listened to the management update on the Western Flank issues on Friday. While there are obviously risks to the outlook, I came away thinking the situation is potentially not as bad as the initial market reaction indicated.

Let me explain…

We’ve been here before when it comes to the Western Flank. In 2016, production from the main reservoir (Namur, represented by the light blue shading in the graph below) began to decline sharply.

However, horizontal drilling and development in the McKinley reservoir saw production turn around and make a new peak in 2020. But production at McKinley is falling faster than the modelling predicted. This is the reason behind last week’s downgrade.

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