Beach Surges as Seven Purchase Stokes Takeover Speculation

Beach Energy Ltd. surged the most in more than six years in Sydney trading after Seven Group Holdings Ltd. purchased a stake in the Australian oil producer, fueling takeover speculation.

Beach advanced 16 percent to A$1.1675, the most since October 2008, after Seven disclosed yesterday that it acquired 13.8 percent of the Adelaide-based explorer. Beach, Chevron Corp.’s partner in a shale venture in the Cooper Basin, is exploring in the Outback region along with companies including Drillsearch Energy Ltd. and Senex Energy Ltd.

“Investors are wondering if the stake is a pure value play, or a prelude to something larger,” Martin Kronborg, Mark Samter and David Hewitt, analysts at Credit Suisse Group AG in Sydney and Singapore, wrote in a report today.

While the list of potential buyers for Beach is long, there are few “obvious” companies, according to Credit Suisse. The plunge in crude prices over the past year is giving companies with cash and a willingness to ride out market volatility an opportunity to acquire assets.

Even after the gains today, which take Beach’s market value to about A$1.5 billion ($1.2 billion), the company has dropped 19 percent in Sydney over the past 12 months. Sydney-based Drillsearch rose 9.1 percent today, and Brisbane-based Senex increased 14 percent.

The world’s biggest oil producers could easily afford Beach, although “it is probably not easy to convince shareholders that now is the time to spend money on a desert in the middle of Australia,” the Credit Suisse analysts wrote. Sydney-based Seven is probably too small to buy Beach, according to the report. Seven has a market value of A$1.6 billion.

Seven, led by former Woodside Petroleum Ltd. Chief Executive Officer Don Voelte, said in the statement yesterday that the Beach purchase is consistent with its strategy of investing in “high-quality energy opportunities.” Seven spokesman Simon Francis in an e-mail declined to comment further on the acquisition.

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