Waitsia Gas Project Will Boost Australian LNG Export Potential

Key Takeaways

• Expansion into LNG exports and domestic gas re-contracting are expected to drive higher margins, revenue growth, and robust, sustained cash flow.
  
• Focus on operational efficiency and emissions reduction enhances market competitiveness, credibility, and supports shareholder returns through resilience and lower risk premiums.
  
• Declining reserves, reliance on risky acquisitions, rising regulatory and ESG costs, and operational uncertainties threaten long-term growth, margins, and profitability.

Catalysts

Operates as an oil and gas exploration and production company.

• The ramp-up and commissioning of the Waitsia Gas Project, positioning Beach Energy as a leading LNG exporter, is expected to significantly boost export volumes and enable higher realized pricing via exposure to international LNG markets-providing a structural uplift to revenue and EBITDA margins starting late FY'26 and beyond.
  
• Beach's re-contracting of large volumes of East Coast gas (post-Cooper Basin joint venture expiry) at prevailing domestic prices, as well as increased spot market and power market participation, is expected to deliver improved pricing and expanded margins, which will positively impact future earnings growth and cash flow.
  
• Structural supply restraint and ongoing energy demand in the Asia-Pacific (driven by urbanization, industrialization, and focus on energy security) are anticipated to underpin high demand for Australian gas, supporting long-term offtake agreements for Beach Energy and providing visibility for sustained revenue and stable cash flows.
  
• The company's sustained focus on operational excellence-evidenced by substantial cost reductions, lower sustaining capital, and a sub-US$30/bbl free cash flow breakeven-provides ongoing margin resilience, higher free cash flow generation, and supports potential increases in shareholder returns (dividends and/or buybacks).
  
• The successful completion and operation of emissions-reduction projects (like Moomba CCS) and strong performance on methane intensity positions Beach as a credible supplier in a market increasingly favoring lower-carbon gas, which should support long-term relevance and market access, reducing risk premiums and potentially supporting valuation multiples.

Beach Energy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Beach Energy's revenue will decrease by 0.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -2.1% today to 25.8% in 3 years time.
• Analysts expect earnings to reach A$537.5 million (and earnings per share of A$0.23) by about August 2028, up from A$-43.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$840.1 million in earnings, and the most bearish expecting A$404 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.7x on those 2028 earnings, up from -64.6x today. This future PE is lower than the current PE for the AU Oil and Gas industry at 14.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.67%, as per the Simply Wall St company report.

Beach Energy Future Earnings Per Share Growth

Risks

• The company's reserve life has declined to just over seven years following recent net 2P reserve downgrades, particularly at Beharra Springs and in the Otway Basin; without successful major new discoveries or acquisitions, production volumes and long-term revenue growth could be at risk.
  
• Ongoing reserve impairments and the necessity to stretch the balance sheet for acquisitions signal limited organic resource growth opportunities and an increased reliance on M&A to sustain the portfolio, which could pressure future earnings or risk value-destructive deals if suitable opportunities do not materialize.
  
• Structural industry shifts-including carbon pricing, emissions reduction targets, and a global move toward renewables-may raise compliance and development costs, reduce access to affordable capital, and result in long-term demand decline for fossil fuels, impacting both margins and Beach's overall valuation.
  
• Operational risks such as cost overruns, delays in bringing key projects like Waitsia online, and unpredictable field behavior (e.g., flooding impacts, reservoir compartmentalization, or faster-than-expected decline in some fields) could drive up costs, lower output and erode profitability and cash flow.
  
• Heightened ESG scrutiny, stricter government regulations on hydrocarbon exploration, decommissioning cost uncertainties, and potential for increased social license challenges may escalate both recurring and abandonment costs, further threatening net margins and long-term earnings.

Valuation

• The analysts have a consensus price target of A$1.295 for Beach Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$2.55, and the most bearish reporting a price target of just A$0.96.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$2.1 billion, earnings will come to A$537.5 million, and it would be trading on a PE ratio of 6.7x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of A$1.24, the analyst price target of A$1.3 is 4.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.