Beach Energy Ltd (ASX: BPT) shares were out of favour on Tuesday.
The energy producer's shares finished the day lower after investors responded negatively to the release of its third-quarter update.
Should you buy the dip? Let's see what analysts at Bell Potter are saying about the company.
What is the broker saying?
Bell Potter was disappointed with Beach Energy's operational performance during the third quarter. It highlights that production fell well short of expectations. However, with sales volumes largely in line, it delivered revenue just ahead of forecasts.
BPT reported March 2026 quarterly production of 4.8MMboe (BP est. 5.4MMboe), sales of 5.3MMboe (BP est. 5.4MMboe) and revenue of $419m (BP est. $418m). Production benefited from the ramp up of Waitsia, offset by weaker output across BPT's other assets, with lower customer nominations and maintenance at the Otways Basin and weather impacts in the Cooper Basin.
Average all-product realised prices lifted 4% to $78/bbl, with stronger oil prices (up 19%) offsetting weaker gas prices (down 4%). BPT ended the quarter with net debt of $396m (prior quarter $445m). Adding back $126m capex implies around $175m in cash flows from operations (prior quarter $205m). Quarter-end funding liquidity was $974m (prior quarter $925m).
The broker also points out that Beach Energy has downgraded its guidance for FY 2026 following the weak production result. It adds:
BPT has downgraded FY26 production guidance by around 5% (midpoint) to 19.4- 20.3MMboe (previously 19.7-22.0MMboe). Key drivers of the downgrade being the impact of cyclone shut-ins and compressor performance at Waitsia, and weather-related impacts in the Cooper Basin. FY26 guidance for capex ($675-775m) and abandonment ($200-250m) are unchanged. While the Waitsia ramp-up was slowed, production rates have now returned to over 200TJ/day (+80% of nameplate 250TJ/day).
Should you buy Beach Energy shares?
In response to the update, the broker has retained its hold rating and $1.15 price target on Beach Energy's shares.
Based on its current share price of $1.19, this implies potential downside of approximately 3%.
Commenting on its recommendation, Bell Potter said:
BPT is in a production replacement cycle with respect to exploration and appraisal. Production growth should return in FY27 and capex ease, enabling positive free cash flow to support balance sheet deleveraging and ongoing dividends. We are positive on BPT's exposure to Australian east coast gas markets (around half of sales volumes) and cautious with respect to global oil markets.
The post Should you buy, hold, or sell Beach Energy shares after its update? appeared first on The Motley Fool Australia.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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