On Thursday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating on Beach Energy (OTC:BCHEY) Ltd (BPT:AU) (OTC: BEPTF (OTC:BEPTF)), with a steady price target of AUD1.79 ($1 = 1.52 AUD). The firm's analysis anticipates potential policy changes in Western Australia (WA) that could affect the company's operations. Specifically, there is an expectation that the WA Government may relax the onshore gas export ban through the local pipeline network before the state budget is announced in May 2024.
Beach Energy's Waitsia project is currently the sole onshore development granted an export exemption, which allows for up to 3.75 million tonnes of liquefied natural gas (LNG) to be exported until December 31, 2028. This exemption is a critical factor for the company, as the WA Government deliberates on how to address several challenges. These include the need for producers to have export routes to commit to new projects, the impact of rising gas prices on residential and industrial consumers, and the looming gas supply shortages in the region.
The Australian Energy Market Operator (AEMO) has forecasted a significant gas shortfall of 105 petajoules (PJ) by 2026. However, ongoing developments in the Perth Basin, such as South Erregulla, Lockyer Deep, and Beach Energy's Waitsia, are expected to mitigate these deficits. The Parliamentary inquiry into the WA Domestic Gas Policy has indicated that the current policy may not be adequate, as noted in an interim report dated February 22, 2024. The report stopped short of formal recommendations but highlighted that revising the gas export ban could serve as an incentive for initiating new gas projects.
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