Beach Energy downgrades Waitsia gas reserves ahead of cost increase

Kerry Stokes-backed Beach Energy has cut its Perth Basin gas reserves after disappointing drilling results and expects a delay and cost bump at its Waitsia project that was being built by failed contractor Clough.

Beach chief executive Morne Engelbrecht said he was confident that after the 11 per cent reserves downgrade the Waitsia field still had enough gas to fulfil plans to export gas through Woodside’s North Shelf plant for five years and after that supply the WA market.

Beach expects to shortly announce a contractor to take over from Clough at Waitsia.
Beach expects to shortly announce a contractor to take over from Clough at Waitsia.Credit:Beach Energy

Beach and its 50 per cent partner Mitsui can only sell gas to the more lucrative international market because in 2020 WA premier Mark McGowan granted an exemption from the state’s ban on the export of onshore gas.

The move was controversial as Stokes’ Seven Group Holdings controls the state’s only newspaper as well as owning 30 per cent of Beach.

Engelbrecht’s assurance that there will be enough gas to supply WA late this decade comes a month after the Australian Energy Market Operator predicted the state most reliant on gas would face a significant shortage from 2030.

Progress on the construction of the 250 terajoules of gas a day stage two of the Waitsia field was hit when principal contractor Clough entered administration in December.

Engelbrecht said the joint venture was close to securing a contractor to complete the project and the impact on the schedule and budget would be revealed when the new contractor was announced.

Beach expected the project to cost up to $800 million and begin export of liquified natural gas in the first half of 2023 when it was approved two years ago.

Italian Webuild has agreed to take over Clough’s interest in the Snowy 2.0 and Inland Rail projects and has completed negotiations with administrators Deloitte on what other projects it will pick up, but these have not been revealed.

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The WA construction sector is suffering severe labour shortages and Clough is understood to have lost about 150 workers since it entered administration.

The downwards revision of proved and probable gas reserves in Beach’s 50 per cent of Waitsia – equivalent to 10.6 million barrels of oil – cut the total reserves of the $3.6 billion company by almost four per cent.

The reserves downgrade, announced with Beach’s quarterly results on Tuesday, came on the day that Gina Rinehart’s high-profile bid for Perth Basin gas play Warrego Energy was to close.

Rinehart’s Hancock Energy has offered 28 cents for each Warrego share, rising to 36 cents if it amasses 40 per cent of the firm that owns half of the West Erregulla gas field.

Hancock had just a 26 per cent stake a week ago and after trading closed on Tuesday extended its offer to February 10.

Strike Energy, Warrego’s partner in West Erregulla, which has a competing one-for-one scrip offer closing February 13, has amassed a 21 per cent stake so far.

Chris Ellison’s Mineral Resources has declared its 19 per cent stake as “strategic” and it has no intention of bidding for the company.

Beach Energy pulled out of the race in December after Hancock bid 28 cents a share.

When trading closed on Tuesday Warrego shares were priced at 34.5 cents a share and Strike scrip fetched 35.5 cents a share.

Beach Energy shares closed as they opened on Tuesday at $1.51.

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Source: Thanks smh.com