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Beach Energy cancels Otway Basin rig contract

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Oilfield Technology,

Beach, as operator of the Victorian Otway Basin gas project joint venture (JV) in Australia, has issued the Ocean Onyx rig operator Diamond Offshore Drilling with a notice of termination for the contract.

The semi-submersible Ocean Onyx rig arrived in Victorian state waters in mid-April for commencement of the Victorian Otway Basin offshore drilling campaign. As the arrival date was later than had been agreed and specified in the rig contract, Beach exercised its right to terminate the agreement. The rig had not yet been accepted by Beach and therefore whilst some preliminary start-up costs have been incurred, the company’s spend to date is not material.

All parties are engaging in discussions with regard to the future operations of the Ocean Onyx rig and the Victorian Otway Basin offshore drilling campaign, with a view to agreeing a new contract in due course. This process will take into consideration executing the drilling campaign during the Covid-19 epidemic and associated restrictions.

Beach’s preliminary assessment is that offshore drilling is unlikely to commence until FY21, with the exact timing to be agreed as part of any new contracting process.

The cancellation of the drilling contract has no impact on Beach’s FY20 production, underlying EBITDA or DD&A guidance. FY20 CAPEX is already expected to be at the lower end of the AUS$875 – 950 million range, is also unchanged, though there is an increased probability of CAPEX coming in below the bottom end of this range.

Beach has also announced that the onshore to offshore Black Watch-1 well was recently completed with drilling results in-line with pre-drill expectations. This well will increase Otway Gas Plant output when it is tied in later this quarter.

The company is planning to spud the Enterprise onshore to offshore exploration well in the second half of calendar 2020.

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