A pullback in flows from a South Australian oilfield could provide more than a production headache for Beach Energy (ASX: BPT) as investors gear up for a potential class action against the company.
Beach Energy shares suffered a 40 per cent price slump in April after the company downgraded its forecast earnings from its Western Flank oilfield in the Cooper Basin by up to $100 million.
The company had been expecting underlying EBITDA of between $900 million and $950 million just eight months earlier. However, the April update pulled back expectations to between $850 million and $900 million, accompanied by a $20 million increase in capital expenditure.
The news sent Beach shares tumbling 25 per cent following the announcement, leading to a low of $1.01 in September, down from a high of $1.70 prior to the downgrade.
Shine Justice (ASX: SHJ) says it is acting on behalf of Beach Energy shareholders following a $900 million slump in the value of Beach Energy’s market value in the aftermath of the April announcement.
“Investors must have been in disbelief as the company’s market capitalisation plummeted more than 40 per cent in 2021,” says Craig Allsopp, Shine’s class actions practice leader.
“Shine Lawyers is investigating whether Beach Energy knew or ought to have known about the decline in its Western Flank business at the time it issued its bullish earnings guidance last August (2020).”
Shine’s investigation will explore whether Beach Energy engaged in misleading and deceptive conduct as well as potential breaches of its disclosure obligations.
Since the share slump, Beach Energy shares have since recovered much of their lost ground, trading as high as $1.52 in recent weeks.
Beach added to its Western Flank oilfield by acquiring existing assets from Senex Energy (ASX: SXY) last year. The company says the acquisition had partially offset reserve downgrade for the field.
“The past five years has seen the Western Flank outperform our expectations, but we are now witnessing material decline from a number of fields,” Beach CEO Matt Kay told shareholders in April when announcing the downgrade.
“This has had a negative impact on our recent production results, as well our FY21 production guidance and Western Flank 2P oil and gas reserves.”
Shine has yet to indicate the damages it will be seeking from a potential class action.
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