Beach Energy (ASX: BPT) Shares Decline Following Citi Downgrade and Revised Price Target

June 07, 2024 03:12 PM AEST | By Team Kalkine Media

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Beach Energy (ASX: BPT) Shares Decline Following Citi Downgrade and Revised Price Target — Image source: © Zorandim | Megapixl.com

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Shares of oil and gas explorer Beach Energy (ASX: BPT) experienced a decline of up to 1.84% on 7 June 2024, reaching AU$1.60 apiece, marking their lowest level since May 8. The downturn comes in the wake of Citi's decision to downgrade the stock from "buy" to "neutral" while simultaneously reducing its price target (PT) by 6% to AU$1.60.

Citi's Downgrade and Rationale

Citi's downgrade of Beach Energy's stocks is attributed to factors such as the upcoming outcome of a strategic review on June 18 and subsequent transformations expected to positively impact BPT. However, the brokerage firm expressed concerns regarding potential oversights in consensus regarding production and capital expenditure forecasts. Despite recognizing the potential benefits of the strategic review, Citi perceives downside risks to earnings and valuations. Moreover, it anticipates a potential negative share price reaction following adjustments to consensus forecasts.

Impact on Earnings and Valuations

Citi has revised its earnings estimates for Beach Energy for fiscal years 2024-2026, lowering them by approximately 2-5% due to a reduced production outlook. Specifically, Citi highlights concerns regarding the company's operations at Otway, Kupe, and Western Flank, leading to a cautious stance on future performance.

Market Performance and Outlook

Despite the recent downturn, Beach Energy's stock had previously shown resilience, recording a 1.9% year-to-date (YTD) increase as of the last close. However, Citi's downgrade and revised PT have prompted market participants to reassess their positions in light of the adjusted forecasts and potential risks associated with Beach Energy's operations.

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