Company Report: Beach Petroleum
Looking toward the future Recovered from a 1980s fraud scheme that drained its assets, Managing Director Reg Nelson says this exploration outfit maintains diverse interests

Beach Petroleum is a long-established oil and gas exploration and production company based in Adelaide, South Australia. The company currently has oil and gas reserves of 66 million barrels of oil equivalent and contingent gas and liquid resources of 293 million barrels of oil equivalent, an annual oil production of over nine million barrels of oil equivalent and an active drilling program with a well balanced portfolio of tenements. Beach Petroleum holds interests in more than 300 exploration and production tenements in Australia, New Zealand, Papua New Guinea, Egypt, Spain and Albania and continues to seek additional domestic and international opportunities.

The company was established in 1961 by the late Dr. Reg Sprigg, a highly regarded Australian oilman, geologist, explorer and conservationist, and was listed on the Australian Stock Exchange in 1962. Prior to founding Beach Petroleum, Sprigg had acted as technical advisor to Santos Limited, now one of Australia's largest oil and gas companies, and was instrumental in focusing Santos' early exploration efforts on the Cooper Basin in Central Australia, now Australia's largest onshore petroleum producing region.

The company's assets grew steadily through the 1960s, 70s and early 80s, by which time it held a broad range of promising exploration and production tenements, extensive cash reserves, and a long term revenue base from its oil and gas discoveries. A pioneering exploration in the Otway Basin of south-eastern Australia resulted in significant discoveries of commercial gas at Port Campbell in 1979.

Further discoveries were made in the early 1980s at Jackson, Bodalla South and Kenmore in south-western Queensland. Then in the mid-1980s a takeover by the Independent Resources Group drained the company of its resources and assets.

Current Managing Director, Reg Nelson, recalls "they were basically fraudsters and stripped Beach of its assets, until the stock market crash of 1987 brought it all apart and a lawsuit was launched that uncovered the fraud. The old board was seen off and a new board put in, which is when I joined, in 1992, as Executive Director."

Nelson was born in Scotland, spent his early youth in Malaysia and moved to Australia at the age of 10. At university, he studied electrical engineering, mathematics and geology and had a choice of becoming "an actuary or a geophysicist. I'm pleased I made the right choice!" As an exploration geophysicist Nelson travelled the world as well as around Australia before being appointed Director of Minerals for the South Australian government.

THE NEW BEACH
After joining Beach, Nelson spent the best part of the 1990s sorting out the mess and getting the company back on the growth path. "The new Beach emerged around 2000 with prospects of finding oil and gas onshore," recalls Nelson. "We found three new onshore gas fields in Victoria, then we picked up large and relatively untouched tenements in the Cooper and Eromanga Basins, explored and found oil. We raised more capital on the basis of this and built up from there. We are now approaching our 50th anniversary and are number four in terms of listed Australian companies in gas and oil production."

The company was also an early starter in coal seam gas in Queensland before selling out at a handsome profit earlier this year. Coal seam gas has enjoyed market focus over the last year or so in Australia, with a number of liquefied natural gas projects in planning. However, other types of unconventional gas are yet to be recognized for their potential in the country.

"There are very large gas reserves in the Cooper Basin, both conventional and unconventional gas, such as shale gas," says Nelson. "We see a natural progression to use of shale gas in Australia as the Federal Government's proposed emissions trading scheme pushes gas forward as a fuel for electricity production rather than coal.

"We'll also be seeing an increasing contribution from solar, wind and geothermal power, which could be important for base load power and suits our skills. We are currently drilling a deep well to try to tap geothermal energy from hot rocks. There are many areas in Australia with very hot rocks, but the problem is the distance from markets and an entry point to the electricity grid. This project has the advantage of being much closer to markets and transmission lines than many others.

"There's a whole sequence of things we can see for Beach in Australia, from developing our conventional gas resources in the Cooper Basin within the next five years, while we assess the economics and viability of the potentially huge unconventional gas resource. Development of geothermal energy probably fits into a 10 to 20 year window."

DIVERSE INITIATIVES
The company has come through the global economic crisis in even better shape than at the start.. "We had record production and record profitability in the 2009 financial year," says Nelson. "Now we are looking at any opportunity in any location that fits our skills. We prefer to work with partners of substance and technical skills, people with local experience who share similar views of how to work. We have the cash flow to continue to expand our exploration portfolio and are looking at a balance of 60 per cent low risk, 30 per cent medium risk and 10 per cent high risk initiatives."

Beach is currently looking to Tanzania as an emerging global petroleum source. "It's becoming a hot area and emerging opportunity," says Nelson. "We think a target size of 200 million barrels is reasonable and fields in order of 500 million barrels are not out of the question."

While development of its large resource base will ensure a strong revenue base and exploration will continue in hope of a major discovery on the research and development side, Beach is looking at both geothermal energy and carbon sequestration as potential areas for the future. "Burying carbon is a safe way to dispose of it," says Nelson, "the trick is in capturing it and moving it."

What makes Beach Petroleum a success, according to Nelson, is a "really good team of people who are very skilled and have a great depth of knowledge. People feel fulfilled professionally and they keep staying. We outsource a lot and keep a small core number of skilled people. We don't want to be too bureaucratic - that's the thing that stifles the exploration spirit. Much of the work we do is in remote places like the Cooper Basin so we also depend on and value good, reliable contractors and suppliers of services and equipment, such as General Petroleum, who supply us with pumping equipment."

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