“The transaction is immediately earnings-accretive for shareholders, with initial estimates pointing to approximately $5 million in annual operating cost savings expected to be realised in the first year post-acquisition.”
The transaction is expected to be settled in next year’s January-March quarter, with the settlement adjusted to July 1, 2020, so that the contribution of the acquired output would be for the full 2020-21 fiscal year, Beach said.
Following the completion of the transaction, Beach will become the sole operator in Cooper Basin’s Western Flank and associated infrastructure.
Beach Energy, like oil and gas producers everywhere, has been hit hard by the destructive impact of COVID-19 on oil and gas prices, as lockdowns and travel restrictions to arrest the advance of the virus across the world have sapped demand for fuels.
Analysts and investors have been expecting Beach to seize on potential acquisitions this year due to its strong balance sheet.
“We had thought Beach’s balance sheet was supportive of an M&A strategy, particularly to leverage in a period of oil price volatility,” RBC Capital Markets’ Gordon Ramsay said.
“We fundamentally like the transaction as we believe it is low-risk in respect of Beach’s existing footprint, its recent success with exploration/appraisal in the area, and further consolidates its position.”