Beach Closes in on North Shadwan by Closing Out Part of Oil Hedge
Beach Petroleum Ltd
Tuesday, July 01, 2008
Beach Petroleum Limited has increased its exposure to the expected higher oil prices in global spot price markets by closing out a significant portion of its oil hedge book for the next six months, as it moves closer to finalizing its $110 million acquisition of the North Shadwan area in the Gulf of Suez.
“Following BP’s waiver of pre-emptive rights for North Shadwan, the prospect of Beach’s obtaining a 20% interest in the concession is looking most favorable,” said Beach’s Managing Director Reg Nelson.
The Australian oil & gas group announced today it had paid out A$50 million to free up its forward oil sales for the opening half of the 2008-09 financial year. Up to 90% of Beach’s oil sales are now available immediately to be sold into the spot price oil market in the opening half of the new financial year – at prices considerably higher than what the Company would have realized under its now dispensed with oil hedge obligations.
“This will maximize the benefits to Beach from a global oil market expected by industry analysts to pay US$150 a barrel and higher for oil in what we believe will be a supply starved and upwards price pressured market in the near to medium term.
“As a result of the close out of these hedges, we expect revenue and cash flow generation to be boosted significantly in the next six months,” said Nelson.
The 534 kbbls portfolio compares to a hedge inventory at December 31 last year of 1,566 kbbls, most of which was an overhang of oil hedges entered into on the financing of Beach’s acquisition of the Delhi Cooper Basin oil assets.