Business Analysis and Valuation Beach Energy LTD

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COMPANY BACKGROUND

Beach Energy Limited works in the domain of oil and gas. It is known for exploration and Production Company. The Beach Energy Ltd’s headquarter is in Adelaide, South Australia. Beach Energy Ltd is listed on ASX. It has regulated and non-regulated, onshore and offshore, oil and gas output from five generating reservoirs throughout Australia and New Zealand, and is a primary provider to the east coast gas sector in Australia. Beach's array of properties comprises controlling stakes in critical oil and gas resources, including the Moomba production plant, and also a range of future opportunities for development. Beach is really dedicated to upholding the greatest level of strength, sustainability and the environment.

Beach’s Values

Beach Energy Ltd focus on following values as a guide: 

  • Safety 
  • Creativity  
  • Respect  
  • Integrity  
  • Performance  
  • Teamwork 

Beach’s Vision

“We aim to be Australia’s premier multi-basin upstream oil and gas company.”

Beach’s Purpose

“Sustainably deliver energy for communities.”

  • COMMON SIZE ANALYSIS AND HORIZONTAL ANALYSIS

There are two main type of financial analysis techniques i.e. vertical (common size) and horizontal analysis (Bernstein, 1999). Common-size research indicates percentage ratios. It is also known as Vertical Analysis, in which each item is compared to a base unit. Revenue is the base item in common size analysis of an income statement. In a balance sheet analysis of common size, total assets is the basis item. Following are the Common size of Income statement and Balance sheet of the Beach Energy Ltd.

Table 1. Common Size of Income Statement

COMMON SIZE OF INCOME STATEMENT 
2019 2018 2017 2016 2015
Revenue 100% 100% 100% 100% 100%
Cost of sales 58% 61% 70% 85% 76%
Gross Profit 42% 39% 30% 15% 24%
Other Income 2% 2% 8% 1% 1%
Other Expenses 2% 16% 10% 123% 113%
Operating profit before
financing costs
42% 25% 28% -106% -88%
Interest Income 0% 1% 1% 1% 1%
Finance expenses 3% 3% 3% 4% 2%
Profit before income tax
expense
39% 22% 26% -110% -89%
Income tax expense/ benefit 11% 7% 12% 6% 19%
Net Profit after tax 28% 16% 38% -104% -70%

 

Table 1 represents the common size of Income statement, in which cost of sales shows a decreasing trend from 2016 to 2019. Whereas, gross profit displays increasing pattern from 2016 to 2019 and this is a good sign for Beach Energy Ltd. Overall net profit after tax shows losses in year 2015 and 2016 whereas it improves in recent years. The FY19, is a blend of some good percentages i.e. cost of sale is 58%, gross profit is 42%, operating profit before financing costs is 42% and net profit after tax is 28%.

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