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Beach faces class action from shareholder

Image shows an ASX tradings board

Photo by Bloomberg

26th November 2021

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Oil and gas producer Beach Energy is facing a shareholder class action.

The company this week confirmed that it had been served with group proceedings filed in the Supreme Court of Victoria, which name Beach as the defendant.

The proceedings, filed by Slater & Gordon Lawyers, are said to be brought on behalf of shareholders who acquired an interest in ordinary shares in Beach and/or American Depository Receipts between August 17, 2020 and April 19, 2021.

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

Law firm Slater & Gordon noted that on August 17 last year, Beach advised the ASX that it had updated its five-year outlook which included expected annual production of between 37- and 43-million barrels of oil equivalent in the 2025 financial year, and cumulative free cash flow of A$2.1-billion for 2021 to 2025.

The company also provided guidance for 2021 which included expected production of between 26- and 28.5-million barrels, and underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) of between A$900-million and A$1-billion.

On February 15 this year, it announced expected 2021 production of between 26.5- and 27.5-million barrels of oil equivalent, and underlying Ebitda of between A$900-million and A$950-million. However, the company maintained its five-year outlook target.

But on April 30, the company completely withdrew its five-year outlook and announced significant downgrades to its 2P oil and gas reserves at the Western Flank. It also downgraded its 2021 guidance, revising expected production to between 25.2- and 25.7-million barrels of oil equivalent and underlying Ebitda to between A$850-million and A$900-million. In the day of trading that followed, the company’s share price dropped by about 25%.

Slater & Gordon Class Actions Lawyer Eleanor Toohey said 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 2020 exploration and appraisal drilling results on 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.”

The lead plaintiffs in the case, John and Gail Nelson, bought 3 000 shares in Beach Energy on April 28, 2021. Just two days later, their investment had plummeted by a quarter.

Beach told shareholders that it considers that it had at all times complied with its disclosure obligations, and has denied any liability and will "vigorously defend" the proceedings.

Edited by Creamer Media Reporter

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