Oil Tipped to Slip, Why Beach Energy Dived 5.48%

Oil producers have come under pressure this morning with Beach Energy Limited [ASX:BPT] losing 5.48% as oil prices fell overnight. Beach Energy has fallen from $2.19 to $2.07 on the back of weaker oil prices sparked by record production.

BPT’s share price hit its largest high since 2002, selling at $2.19 per share. This comes despite Macquarie retaining its underperform rating, setting a fair trading price of $1.75.

What caused Beach Energy to topple?

News out of the company this morning said it would be selling its 40% stake in its Victorian Otway gas assets. The $344 million sale comes as the company has trimmed its earnings guidance from $1.1 billion to $1.2 billion, lowering it to $1.05 billion, from $1.15 billion.

Changes in oil prices overnight are also suspect.

The WTI crude oil price fell 2.3% overnight to US$74.63 a barrel with bent crude also falling 1.7% to US$84.81 a barrel. Prices fell from four-year highs due to growing US inventories and news of a deal between Russia and Saudi Arabia to raise crude production.

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News of the deal suggests the production of an extra one million barrels a day. Russia is already producing record amounts of crude and Saudi Arabia is not far behind. Reuters reports that the deal was struck in September to cool rising oil prices.

With a jump of 27% in this year alone moving the price to over US$85 per barrel, some major traders are tipping prices to reach US$100 per barrel by the end of the year.

Bloomberg oil

Source: Bloomberg

What’s next for Beach Energy?

Late last month, Beach Energy announced it was expecting a period of exciting growth over the next few years. The company announced an expansion of its core Cooper Basin fields as well as several other ventures, tipping output to 40 million barrels.

However, given that the announced selloff of Otway and trimmed guidance figures investors don’t appear to be optimistic. With the excess production of oil coming in from Russia and the Middle East, BPT might be finding its self in some choppy waters.


Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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