Beach Won't `Stand Still' After Deal to Acquire Drillsearchby
Beach agreed last month to buy Drillsearch for A$384 million
Australian explorer may look at Cooper Energy, analyst says
Beach Energy Ltd. will weigh further acquisitions amid a slide in oil prices after the A$384 million ($275 million) agreement to buy Australian competitor Drillsearch Energy Ltd.
“We’re not going to stand still if things come to us that look interesting and have value,” Neil Gibbins, the acting chief executive officer of Beach, said in an interview Thursday in Sydney.
Beach is moving ahead with ambitions to become one of the 50 biggest companies on the Australian stock exchange as M&A activity heats up in the oil industry. The Drillsearch deal unveiled last month will probably be the first of many in the oil sector after a slide in crude prices, according to a Citigroup Inc. report in October.
A combined Beach and Drillsearch, which would have a stock market value of about A$1.2 billion and be the largest oil producer in central Australia’s Cooper Basin, may look at buying explorer Cooper Energy Ltd., John Young, an analyst at Ord Minnett Ltd. in Melbourne, said by phone Wednesday. Competitor Senex Energy Ltd. will possibly try to snap up assets as well, he said.
Beach rose 1.6 percent to 65 cents in Sydney trading, valuing the company at A$847 million.
Beach, based in Adelaide, is interested in potential growth options in Australia, including assets tied to the east-coast gas market, as well as opportunities “nearby,” Gibbins said, declining to discuss any specific businesses.
“Given the downturn in the oil price and the situation some companies are in and the fact that assets are coming on the market it just puts you in a much stronger position to be able to look at those opportunities,” he said.
The rout in oil prices has led to sales at Beach dropping 38 percent in the latest quarter from a year earlier and its shares plunging 41 percent in the past year. Beach had A$174 million in cash in September.
Santos Ltd. last month rejected an offer from Scepter Partners, an investment firm backed by Asian and Middle Eastern royalty, while Oil Search Ltd. in September rejected an $8 billion bid from Woodside Petroleum Ltd.
“The fact we’ve had a number of proposed transactions in a relatively short time suggests that industry participants believe there is value emerging in some of these companies,” Young said.