00:00Brett, such an interesting time to be in your business, perhaps the wrong kind of interesting.
00:05Against this backdrop of geopolitical uncertainty, also domestic upheaval that I'll get to in
00:09a moment, how's that impacting your decision making?
00:12It's a really good question.
00:14The challenges we see is probably fundamentally about the supply chain, making sure that we
00:19have enough diesel to support our field based operations, but critically Australia is short
00:24of liquids fuels, so 100% of our oil production, and we're one of the country's largest oil
00:29producers.
00:30It's now being diverted to domestic-only refineries, which is really important, and we've increased
00:35our drilling execution across our oil operations in Central Australia.
00:39So we've got 12 development wells going in at the moment, and then we're going to pivot
00:42straight into 10 additional wells to connect and bring online to help support fuel security
00:48in Australia.
00:48And I think it's been important for Australians to recognise the importance of having access
00:54to fuels, given we've gone from six refineries back down to two, it's really kind of exposed
00:59Australia in terms of its fuel security.
01:01What are the risks with some of these kinds of investments, though?
01:03Because if we get a quick solve in the Middle East, which isn't completely out of the question
01:07due to the looming midterms, what does that mean for the cost of the investment in this
01:12new infrastructure?
01:13Yeah, I think the important part for us is to make sure that we execute stuff that stays
01:17free cash flow positive, even if there's any drastic deviation to oil price.
01:22So we're picking through our inventory of opportunities to make sure that if we do see a drastic turn
01:28in oil price, which we're not forecasting, that we are defended on the low side.
01:32So you're right, we can't throw everything at it, otherwise you'll stress balance sheets.
01:38So we try and do it in a very prudent and capitally efficient manner.
01:41Heidi was mentioning there in the introduction that the changes in the domestic scene as well,
01:46the 20% gas reservation potential changes to the petroleum resource rent tax.
01:51How are you navigating that regulatory uncertainty?
01:54And is Australia still a good place to invest?
01:56Yeah, again, really good questions.
01:58I think the challenge for us at the moment is we've had different ministers of this government
02:02say drastically different things.
02:04And under the situation where you have a prospective reservation policy, I think the whole industry
02:11is very supportive.
02:13But at the moment, they're suggesting it's kind of retrospective, that 20% of all exports
02:18be diverted to domestic market.
02:20And as a consequence, we'll see a short term sugar hit in terms of lower gas prices.
02:25And Monday in the East Coast of Australia, we had some of our lowest ever domestic gas prices
02:30around, not ever, last five years, around $7.50.
02:34So what we're seeing is that will drive the investment signals away from investing in projects
02:39like we're looking to do.
02:40So you may get a short term benefit for manufacturing for a year or two.
02:45But without the constant investment from our industry, you'll soon see the prices return
02:49to a much, much higher levels without that ongoing investment.
02:53Some of your big competitors like Wusai, Santos, they're looking to streamline operations,
02:58find efficiencies.
02:59Are you doing the same sorts of things?
03:00Yeah.
03:01Well, I've been in the job now for two years.
03:02And when I joined, we were probably one of the highest cost operators in Australia.
03:06So we've taken our cost base from $17 a barrel down to $10 a barrel.
03:10So we've reduced our headcount from over $800 down to $450.
03:16So I think with a 35% lowering of our operating costs, we've delivered a material change in
03:23our margin that we generate per barrel.
03:25So we're still on that journey.
03:27I'm still focused on liberating as much cost and value I can out of our operations because
03:34that enables me to execute more projects.
03:36And now we're utilizing all the tools, including kind of the AI to help our operations and
03:42even the back office stuff with AI is operating much better.
03:45So we'll continue to focus on cost and efficiency.
03:48In Australia, we're seeing 4% inflation.
03:50So we need to beat inflation each year.
03:54Otherwise, our business goes backwards.
03:55So we're really focused on cost.
03:57We are in an environment at the moment with very high energy prices.
04:00Companies have strong earnings, strong balance sheets.
04:03It looks like the stars are aligning for M&A.
04:06Are you concerned that Beech could be a target, being one of the smaller players in the domestic
04:10scene?
04:10Well, it's a very interesting point.
04:12I think now that the government has suggested 20% of export volumes need to be dedicated to
04:17Australian operations.
04:19Across the East Coast of Australia, the critical energy market here, we're a domestic-only
04:23producer.
04:24So I think some of the export companies will be looking at us thinking, how can we work with
04:28Beech?
04:29Or what can we do with Beech to make sure we can offset our obligations and continue to
04:33deliver their higher margin export?
04:35You know, at the moment, JKM is in the high teens and Australian prices are in sub 10.
04:43So there is a huge arbitrage in value.
04:46And so I do see that there are some risks of the larger players starting to look at Beech.
04:50But on the flip side, we also have a fantastic balance sheet.
04:53Less than 15% gearing, very strong free cash flow generation.
04:57We have a great opportunity to grow our business.
05:00And that's one of the objectives that now we have our big project in West Australia online.
05:03Our focus is to grow and trying to consume and execute more projects to bring more gas
05:10to market.
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