Beach Energy Ltd., an explorer developing shale gas resources in central Australia, slumped the most in seven months in Sydney trading after results at one of its wells disappointed some investors.
Beach fell 8.6 percent to A$1.33, the biggest drop since June 4, while the S&P/ASX 200 Index rose 0.1 percent. Senex Energy Ltd., Drillsearch Energy Ltd. and Icon Energy Ltd., other explorers in the Cooper Basin straddling the South Australia and Queensland border, also declined.
A peak rate of 2.6 million standard cubic feet per day was recorded at the Moonta-1 gas well, according to a Jan. 18 statement from Adelaide-based Beach, whose operations include 20 oilfields and six gas discoveries in the Cooper Basin. Beach is among explorers in the outback region seeking to benefit from rising prices and demand driven by projects on the east coast to ship liquefied natural gas to Asia.
Although Beach’s flow rate is the highest it has achieved, “it is likely to fall short of expectations,” according to a Jan. 18 note from Macquarie Group Ltd. Expectations were as high as 4 million standard cubic feet per day, said Macquarie, which forecasts Beach shares will rise to A$1.70 in 12 months.
“While we expect some weakness on the back of this result, it does confirm that Beach can deliver meaningful flow rates from this previously untested interval,” Macquarie said.
Beach, Santos Ltd., Drillsearch and Senex are among oil and gas producers developing shale prospects in Australia, which has almost 400 trillion cubic feet of estimated shale gas reserves that may be recoverable, according to a 2011 report from the U.S. Energy Information Administration.
Senex declined 4.1 percent to 70 cents in Sydney trading today, while Drillsearch fell 4.4 percent to A$1.41. Icon dropped 6.4 percent to 22 cents.
“Big flow rates will be required in order for wells to be economic, but we’re still in the laboratory phase if you like, where people are working out where the resource lies and what’s the best way of extracting it,” John Young, a Melbourne-based oil and gas analyst at Wilson HTM Investment Group, said by phone today. “That’s going to take time.”
Beach has fallen 10 percent this year, valuing the company at A$1.68 billion ($1.7 billion), compared with a 2.8 percent gain in Australia’s benchmark index.