Photo by: Bloomberg
PERTH (miningweekly.com) – Australian oil and gas producer Beach Energy has revealed annual cost savings of up to A$40-million for the 2017 financial year, following an earlier merger with Drillsearch Energy.
However, the ASX-listed company has warned that further job cuts were to be expected.
Beach at the beginning of March concluded a A$384-million merger with Drillsearch, under which Drillsearch shareholders were offered 1.25 Beach share for each of their Drillsearch shares.
The initial stages of integration identified cost savings of around A$28-million, but Beach noted on Wednesday that due to a further reduction in headcount resulting from the merger, accelerated closure of the Sydney office, and associated savings in corporate administration costs, additional synergies have now been confirmed.
Beach had initially warned that some 56 staff from the merged entity would be made redundant by April this year, but this number has now been increased to 60, as the integration focused on eliminating the duplication of operational and corporate employment positions.
A further four positions would be made redundant before the end of May.
Beach would also look to cut staff from its own ranks, with the miner intending to reduce total staff numbers from the 301 reported at the end of June last year, to 213, with 21% of the staff reductions directly attributed to the merger.
“Integration of Beach and Drillsearch continues to track ahead of schedule, with merger synergies exceeding original expectations,” said Beach acting CEO Neil Gibbins.
“The results achieved to date make the combined business a leaner, more robust operation. The merger has strengthened our ability to weather current market volatility and better positions us to take advantage of a future improvement in conditions.”
Meanwhile, Beach on Wednesday also increased its production expectation for the 2016 financial year, from the original estimate of between 8-million and 8.6-million barrels of oil equivalent, to between 9.5-million and 9.8-million barrels of oil equivalent.
The increase in production would be driven by better-than-expected performances from the Beach permit areas, as well as from the Drillsearch permit areas.
Capital expenditure for the full 2016 was expected to reach between A$180-million and A$210-million.