Beach Energy taken to the Federal Court by shareholders

Beach Energy taken to the Federal Court by shareholders

Slater and Gordon (ASX: SGH) has launched a class action against Adelaide-based oil and gas company Beach Energy (ASX: BPT) on behalf of investors who incurred losses following a decline in the company’s share price.

SGH alleges investors who incurred losses after acquiring Beach Energy shares between 17 August 2020 and 29 April 2021 were misled by the company, which saw a significant decline in its projected earnings from its Western Flank oil and gas reserves in the Cooper Basin.

The class action alleges the energy company engaged in misleading or deceptive conduct and breached its continuous disclosure obligations under the Corporations Act.

Slater and Gordon details how on 17 August last year, Beach Energy advised the ASX it had updated its five-year outlook which included expected annual production of between 37 and 43 million barrels of oil equivalent (MMboe) in FY25, and cumulative free cash flow of $2.1 billion for FY21 to FY25.

Beach Energy also provided guidance for FY21 at the time, which included expected production of between 26 and 28.5 MMboe and underlying EBITDA of between $900 million and $1 billion.

This year, it announced expected FY21 production of between 26.5 and 27.5 MMboe and underlying EBITDA of between $900 million and $950 million. However, Beach maintained its five-year outlook target at the time.

The law firm says on 30 April Beach Energy completely withdrew its five-year outlook and announced downgrades to its oil and gas reserves at Western Flank. In addition, it downgraded its FY21 guidance, revising expected production to 25.2 and 25.7 MMboe and underlying EBITDA to between $850 million and $900 million.

Following the announcement, shares in Beach Energy dropped by about 25 per cent.

Slater and Gordon class actions lawyer Eleanor Toohey alleges Beach Energy knew or ought to have been aware that it had failed to consider factors that would affect its performance. This included the largely unsuccessful FY20 exploration and appraisal drilling results in the Western Flank, the declining reserves position on the Western Flank, and the reliability of the modelling system used to assess reserves on the Western Flank.

“As a result of our investigation following Beach Energy’s profit downgrades in the 2021 financial year, we concluded that there was a strong basis to allege that the company provided misleading guidance and was obliged to correct the market’s understanding of its financial position at a much earlier time,” Toohey said.

“Investors are entitled to assume that when they purchase shares in a listed company all of the material information relevant to its financial position has been disclosed.

“The downgrades by Beach Energy during the August 2020 to April 2021 claim period caught the market by surprise and revealed that this had not been the case.”

In response, Beach Energy says it “considers that at is has at all times complied with its disclosure obligations, denies any liability and will vigorously defend the proceedings”.

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