30 May 2013 Asia Pacific/Australia Equity Research Oil & Gas Exploration & Production

Beach Energy (BPT.AX / BPT AU) Rating OUTPERFORM* Price (30 May 13, A$) 1.16 INITIATION

Target price (A$) 1.60¹ Market cap. (A$mn) 1,470.65 Yr avg. mthly trading (A$mn) 227 Let's go to the Beach Last month's trading (A$mn) 176 Projected return: ■ Initiate coverage on BPT with OUTPERFORM with a $1.60/sh target Capital gain (%) 37.9 price: We initiate coverage on BPT with an Outperform rating and a Dividend yield (net %) 1.9 $1.60/sh target price, set broadly in line with our risked valuation of $1.58/sh. Total return (%) 39.9 52-week price range 1.54 - 0.90 ■ Investment case: Our positive view is predicated on BPT’s strong Cooper * Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. Basin conventional oil & gas business with forecast 10% p.a. production growth in FY11-15, a healthy balance sheet with FY13 net cash of $175mn, Research Analysts solid cashflow generation with FY14 EBITDA of $308mn and an experienced, James Redfern proven management team. We also believe BPT is well positioned to benefit 61 2 8205 4779 [email protected] from rising gas prices which we expect to double to A$8/GJ by 2015-16. BPT also offers significant exploration upside through the potential Paul McTaggart 61 2 8205 4698 development of its Cooper Basin unconventional gas resource and potential [email protected] ‘big oil’ discoveries in Tanzania. While Cooper Basin shale gas is currently uneconomic, we believe that in time the Nappamerri Trough may prove to be commercial due to an increase in gas prices to A$8-10/GJ, higher flowrates, estimated ultimate recoveries (EURs) and lower capex per well. ■ Catalysts: Further updates on flowrates with ~5 shale gas wells due to be fracture stimulated in the next four months, June quarterly report due 30 July, further E&A drilling success in conventional Cooper Basin, higher oil prices. ■ Valuation: We value BPT at $1.58/sh risked ($2.15/sh unrisked) which comprises a core valuation of $0.95/sh for BPT’s producing assets in the Cooper Basin and Egypt using a DCF (11% WACC), adjusted for FY13 net cash of $175mn. We also estimate $0.50/sh of risked potential exploration upside owing to BPT’s Cooper Basin unconventional gas acreage and its prospective Tanzania acreage with the potential for ‘big oil’ discoveries.

Total return forecast in perspective Financial and valuation metrics

Year 06/12A 06/13E 06/14E 06/15E 80% Production (mmboe) 7.5 8.1 9.4 9.7 60% Revenue (A$mn) 664.6 701.4 773.8 775.0 40% CS tgt^ Mean^ EBITDAX (A$mn) 303.3 308.6 352.3 361.2 20% EBIT (A$mn) 194.6 185.3 209.9 225.5 0% Sh Prc Net income (A$mn) 163.3 129.7 153.6 161.0 EPS (CS adj.) (A¢) 13.99 10.31 12.16 12.70 -20% Change from previous EPS (%) n.a. — — — -40% Consensus EPS (A¢) n.a. 9.60 10.90 12.20 12mth Volatility* 52wk Hi-Lo IBES Consensus EPS growth (%) 256.6 -26.3 17.9 4.4 target return^ P/E (x) 8.3 11.2 9.5 9.1 Dividend (A¢) 2.25 2.25 2.25 2.25 Performance over 1M 3M 12M Dividend yield (%) 1.9 1.9 1.9 1.9 Absolute (%) -14.7 -19.2 4.0 EV/EBITDAX 4.0 3.9 3.4 3.3 Relative (%) -9.7 -16.1 -16.4 Net debt/equity (%) Net cash Net cash Net cash Net cash

Relative performance versus S&P ASX 200.See Reference Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E against Appendix for a description of the chart. Source: Credit Suisse ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency estimates, * Consensus, mean range from Thomson Reuters DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683 US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION® Client-Driven Solutions, Insights, and Access

30 May 2013 Table of contents

Investment summary 4 Valuation 5 Holt valuation 7 Key risks 8 Company overview 9 Reserves and Resources 10 Production profile 11 Financial profile 12 Capex and funding requirements 12 Debt and gearing 13 Earnings forecasts 14 Petroleum Resource Rent Tax 14 Exxon Mobil Royalty 14 Royalties and taxes 15 Dividend policy 15 Sensitivities 15 Asset description 16 Western Flank 16 PEL 91 and PEL 92 16 PEL 104 and PEL 111 17 PEL 106B and PEL 107 18 Cooper and Eromanga Basin 19 SACB and SWQ Joint Ventures 19 Cooper Basin Unconventional Gas 21 How do we value unconventional shale gas resources? 23 What is required for Cooper Basin shale gas to breakeven? 24 Chevron farm-in deal 27 SACB JV 28 International assets 29 Egypt 29 Tanzania 30 Eastern Australian Gas Prices 33 Contracted Gas Sales 34 Board and Management 35 Shareholder structure 36 Australian Energy Sector Comps 37 Environment, Social and Governance 38 PEERS Overview 43

Beach Energy (BPT.AX / BPT AU) 2 30 May 2013

Figure 1: BPT financial summary

Beach Energy (BPT) 2011 2012 2013 Year2014 ending 302015 Jun 2011 2012 In AUDmn,2013 unless 2014otherwise stated2015 Share Price: A$1.16 30/05/2013 17:31 Earnings 06/11A 06/12A 06/13E 06/14E 06/15E Rating OUTPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 1,098.4 1,167.8 1,258.0 1,263.0 1,268.0 Target Price A$ 1.60 c_EPS*100EPS (Normalised) c -8.9 14.0 10.3 12.2 12.7 vs Share price % 37.93 EPS_GROWTH*100EPS Growth % 256.6 -26.3 17.9 4.4 DCF A$ 1.58 c_EBITDA_MARGIN*100EBITDA Margin % -4.2 45.6 44.0 45.5 46.6 BPT is an ASX100 oil and gas exploration and production company focused on the Cooper c_DPS*100DPS c 1.8 2.3 2.3 2.3 2.3 and Eromanga Basin, accounting for ~98% of 2P reserves and production. BPT is also a major c_PAYOUT*100Payout % -19.6 16.1 21.8 18.5 17.7 player in the potential development of Cooper Basin unconventional shale gas. FRANKING*100Franking % 100.0 100.0 100.0 100.0 100.0 c_FCF_PS*100Free CFPS c 13.2 14.3 16.7 17.7 16.9 Profit & Loss 06/11A 06/12A 06/13E 06/14E 06/15E c_TAX_RATE*100Effective tax rate % 19.6 12.6 30.7 30.0 30.0 Sales revenue 524.3 664.6 701.4 773.8 775.0 Valuation EBITDA (22.1) 303.3 308.6 352.3 361.2 c_PE P/E x -13.0 8.3 11.2 9.5 9.1 Depr. & Amort. (101.7) (108.7) (123.3) (142.4) (135.7) c_EBIT_MULTIPLE_CURREV/EBIT x -10.5 6.2 7.0 6.7 6.5 EBIT (123.8) 194.6 185.3 209.9 225.5 c_EBITDA_MULTIPLE_CUEV/EBITDA x -58.6 4.0 4.2 4.0 4.0 Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 1.5 1.9 1.9 1.9 1.9 Net interest Exp. 2.6 (6.8) 1.9 9.5 4.5 c_FCF_YIELD*100FCF Yield % 11.3 12.3 14.4 15.3 14.5 Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 1.0 0.9 0.8 0.8 0.7 Profit before tax (121.3) 187.8 187.3 219.4 230.0 Returns Income tax 23.8 (23.6) (57.6) (65.8) (69.0) c_ROE*100Return on Equity % -7.7 10.1 7.5 8.3 8.1 Profit after tax (97.5) 164.2 129.7 153.6 161.0 c_I_NPAT/c_I_SALES*100Profit Margin % -18.7 24.6 18.5 19.8 20.8 Minorities (0.7) (0.9) (0.0) (0.0) (0.0) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.3 0.3 0.3 0.3 0.3 Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.3 1.3 1.4 1.4 1.3 Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % -6.2 7.6 5.4 6.1 6.0 Normalised NPAT (98.1) 163.3 129.7 153.6 161.0 c_ROIC*100Return on Invested Cap. % -9.1 12.6 8.3 8.2 8.0 Unusual item after tax 139.5 (42.2) 17.2 0.0 0.0 Gearing Reported NPAT 41.4 121.2 146.9 153.6 161.0 c_GEARING*100Net Debt to Net debt + Equity % Net Cash Net Cash Net Cash Net Cash Net Cash c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x Net Cash Net Cash Net Cash Net Cash Net Cash Balance Sheet 06/11A 06/12A 06/13E 06/14E 06/15E c_I_EBITDA/Int Cover c_I_NET_INTEREST (EBITDA/Net Int.) x 8.6 44.5 -159.5 -37.0 -79.9 Cash & equivalents 173.3 378.5 367.1 249.6 206.7 c_I_EBIT/Int Cover c_I_NET_INTEREST (EBIT/Net Int.) x 48.3 28.5 -95.8 -22.1 -49.8 Inventories 66.7 64.4 48.8 59.0 62.6 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 7.6 7.8 11.4 10.9 10.8 Receivables 54.4 114.9 110.3 118.1 118.0 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 39.4 47.5 65.0 59.0 61.9 Other current assets 14.2 6.8 3.7 3.7 3.7 Current assets 308.5 564.6 529.8 430.4 390.9 MSCI IVA (ESG) Rating BBB Credit Suisse View Property, plant & equip. 318.5 336.8 385.5 426.8 470.1 TP ESG Risk (%): -5 TP Risk Comment: We see 5% downside risk due to ESG issues Intangibles 0.0 0.0 0.0 0.0 0.0 7.2 such as environmental conerns around hydraulic fracturing. Other non-current assets 960.8 1,246.9 1,472.6 1,678.4 1,804.4 6.7 Non-current assets 1,279.3 1,583.6 1,858.1 2,105.2 2,274.4 6.2 Total assets 1,587.8 2,148.2 2,387.9 2,535.6 2,665.4 5.7 Payables 122.1 121.0 110.4 133.1 130.6 5.2 Interest bearing debt 0.0 113.4 191.6 191.6 191.6 4.7 MSCI IVA Risk: Other liabilities 193.2 301.9 361.6 361.6 361.6 4.2 MSCI IVA Risk Comment: Total liabilities 315.3 536.3 663.6 686.3 683.8 3.7 Net assets 1,272.5 1,611.8 1,724.4 1,849.3 1,981.6 3.2 Ordinary equity 1,266.8 1,611.8 1,724.4 1,849.3 1,981.6 Environment Social Governance

Minority interests 5.7 0.0 0.0 0.0 0.0 Stock Local Sector Preferred capital 0.0 0.0 0.0 0.0 0.0 Country Global Sector Total shareholder funds 1,272.5 1,611.8 1,724.4 1,849.3 1,981.6 Net debt -173.3 -265.1 -175.5 -58.0 -15.1 Source: MSCI ESG Research

Cashflow 06/11A 06/12A 06/13E 06/14E 06/15E Share Price Performance EBIT -123.8 194.6 185.3 209.9 225.5 1.80 Net interest 8.5 -0.9 10.2 9.5 4.5 1.60 Depr & Amort 101.7 108.7 123.3 142.4 135.7 Tax paid -2.4 0.0 -36.9 -65.8 -69.0 1.40 Working capital 114.2 -59.3 9.5 4.7 -5.9 1.20

Other 86.4 -24.9 -1.2 7.1 7.1 1.00 Operating cashflow 184.5 218.2 290.3 307.7 297.9 Capex -40.0 -51.7 -80.2 -84.0 -84.0 0.80 Capex - expansionary 0.60 Capex - maintenance Acquisitions & Invest -200.4 -287.7 -371.2 -312.0 -227.4 0.40 Asset sale proceeds 43.2 0.1 0.0 0.0 0.0 0.20 Other 25.7 1.5 92.9 -0.6 -0.6 0.00 Investing cashflow -171.5 -337.7 -358.5 -396.6 -312.0 18/05/2012 18/07/2012 18/09/2012 18/11/2012 18/01/2013 18/03/2013 18/05/2013 Dividends paid -12.1 -10.7 -19.9 -28.6 -28.7 Equity raised 4.6 189.2 0.0 0.0 0.0 BPT.AX XJO Net borrowings 0.0 145.1 75.0 0.0 0.0 Other 0.8 0.5 1.4 0.0 0.0 1 Month 3 Month 12 Month Financing cashflow -6.8 324.2 56.6 -28.6 -28.7 Absolute -14.7% -19.2% 4.0% Total cashflow 6.3 204.7 -11.6 -117.5 -42.8 Relative -9.7% -16.1% -16.4% Adjustments -2.9 0.5 0.2 0.0 0.0 Net change in cash 3.4 205.2 -11.4 -117.5 -42.8 Source: Reuters 52 week trading range: 0.90-1.54 Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 3 30 May 2013

Investment summary Beach Energy Limited (BPT) is a Cooper Basin focused oil & gas company with FY13 production of 8.1 mmboe and anticipated 10% p.a. production growth in FY11-15. We believe the company is led by a highly experienced, strong management team with a solid knowledge of the Cooper Basin geology. BPT’s experience and knowledge of the Cooper Basin has resulted in an average 56% success rate in exploration and appraisal drilling over the past decade. In turn, such drilling success has resulted in consistent growth in reserves and production (Figure 2-3), which we expect to continue. BPT expects to convert over 10 mmboe of resource into 2P reserves in FY13.

Figure 2: 2P reserves growth driven by drilling successes Figure 3: Production by type (mmboe) 160 10.0 9.0 140 8.0 120 7.0 100 6.0 5.0 80

4.0 in mmboe in 60 3.0 40 2.0 1.0 20 0.0 0 FY10 FY11 FY12 FY13F FY14F FY15F FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Sales Gas & Ethane Crude oil Condensate LPG 2P Reserves (MMboe)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates Exploration upside from Cooper Basin unconventional gas and ‘big oil’ in Tanzania BPT also offers significant exploration upside potential through the development of its unconventional shale gas resources in the Nappamerri Trough in the Cooper Basin, which in several years may prove to be economic. We are also attracted to BPT’s 100% interest in the Lake Tanganyika South Block in Tanzania where management is targeting several ‘big oil’ discoveries of ~200 mmbbl each. In August 2012, Australia’s first shale gas well—Moomba-191 (BPT 20%)—was spudded and quickly brought onto production and connected to the Moomba gas processing facility. With an estimated capex of A$15-20mn, a current flowrate of ~2.0 MMscf/d and A$4/GJ gas price, the Moomba-191 well is considered uneconomic. However, BPT continues to gather valuable flowrate data from the well and intends to drill ~10 vertical and horizontal shale gas wells while fracture stimulating ~7 wells during FY13 as part of its exploration and appraisal programme. In May 2013, Chevron completed Stage 1 of a farm-in agreement of up to 60% of BPT’s interests in PEL 218 and ATP 855 for cash and carry of up to US$349mn. We view the farm-in positively as Chevron brings strong technical expertise in developing shale assets while reducing BPT’s capex through a carry. Well positioned to benefit if domestic gas prices double as we forecast We forecast gas consumption on Australia’s east coast to triple from 700 PJ in 2012 to ~2,200 PJ by 2015 following the ramp up of the three Gladstone LNG projects (QCLNG, GLNG and APLNG). Consequently, east coast domestic gas prices are forecast to double to A$8-10/GJ (A$3-4/GJ currently). As BPT is a pure play Cooper Basin producer with no interests in downstream LNG projects, the company is well placed to benefit from such higher gas prices. Last month, BPT agreed on an eight-year gas supply agreement with Origin Energy for ~139 PJ starting in FY15 based on oil linked pricing which we estimate to be A$8/GJ. In addition, we estimate BPT has ~8.5 PJ of uncontracted gas from FY17 which is expected to be sold at similar prices.

Beach Energy (BPT.AX / BPT AU) 4 30 May 2013

Valuation We value BPT at $1.58/sh risked and $2.15/sh unrisked. Our risked valuation of $1.58/sh, comprises a core valuation of $0.95/sh for BPT’s producing assets in the Cooper Basin and Egypt using a DCF (11% WACC), adjusted for FY13 net cash of $175mn. We also estimate $0.50/sh of risked potential exploration upside owing to BPT’s Cooper Basin unconventional gas acreage and its prospective Tanzania acreage with the potential for ‘big oil’ discoveries of 200 mmbbl each. Investors appear to be ignoring Cooper basin unconventional gas potential Based on the current share price of $1.16/sh, BPT is trading at 0.73x price/DCF and it appears the market is ascribing little value to BPT’s Cooper Basin unconventional assets. While we acknowledge it is too early to confirm the commerciality of shale gas development in the Cooper basin, we believe that in the next couple of years the picture will become clearer. Factors that should help improve the economics of unconventional gas include domestic gas prices moving higher towards ~A$8/GJ, improved knowledge of the reservoir characteristics in the Nappamerri Trough through further drilling, and the expansion of the relatively small oilfield services industry in Australia to provide directional drilling and fracture stimulation services. It is also difficult to value BPT’s 329 mmboe of 2C unconventional resource which are currently uncommercial. However, we believe the recent Chevron farm-in agreement with BPT for a 60% interest in PEL 218 and ATP 855 provides a good benchmark. The Chevron farm in consideration (cash and carry) of US$349mn values PEL 218 and ATP 855 at US$223,500/sq km. We have applied this transaction multiple to BPT’s 2,476 sq. km of unconventional acreage in PEL 218, ATP 855 and SACB JV and obtain a valuation of $553mn ($0.44/sh). We would also argue that unconventional acreage in the SACB JV is more valuable as it is closer to existing pipelines and the Moomba gas processing facility. We set our target price at $1.60/sh, broadly in line with our risked valuation of $1.58/sh. With ~40% potential upside we initiate coverage with an OUTPERFORM.

Figure 4: BPT valuation summary Unrisked Unrisked Risk Risked Risked 2P Reserves Risked Project BPT share $Amn A$ps Weighting $Amn A$ps (mmboe) $/boe Cooper and Eromanga Basins 1,128 0.89 1,128 0.89 93.1 12.1 SACB JV 20% 555 0.44 100% 555 0.44 64.1 8.7 SWQ JV 23% 196 0.16 100% 196 0.16 14.9 13.1 PEL 91 40% 110 0.09 100% 110 0.09 4.4 25.0 PEL 92 75% 133 0.11 100% 133 0.11 4.5 29.6 PEL 106B and PEL 107 50% 51 0.04 100% 51 0.04 2.0 25.5 PEL 104-111 40% 83 0.07 100% 83 0.07 3.2 25.9 Egypt 74 0.06 74 0.06 1.6 46.1 North Shadwan 20% 53 0.04 100% 53 0.04 1.1 48.3 Abu Sennan 22% 21 0.02 100% 21 0.02 0.5 41.2 Core NAV 1,201 0.95 1,201 0.95

Cash on hand (30 June 2013) 367 0.29 367 0.29 Debt (30 June 2013) -192 -0.15 -192 -0.15 Net cash (debt) 175 0.14 175 0.14 Corporate -17 -0.01 -17 -0.01 Net cash and other 159 0.13 159 0.13

Base Valuation 1,360 1.08 1,360 1.08 Cooper Unconventional gas (US$224k per sq km) 61% 553.4 0.44 100% 553 0.44 Tanzania (200 mmboe @ US$4/boe) 800.0 0.63 10% 80 0.06 Exploration NAV 1,353 1.07 633 0.50

Total valuation 2,714 2.15 1,994 1.58 Potential upside 84% 35% ESG impact to valuation: We estimate 5% potential downside relating Shares Outstanding (mn) 1,260.5 to ESG issues such as environemntal concerns around hydraulic Average Daily Trade ($Amn) fracturing. Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 5 30 May 2013

As shown in the waterfall chart below (Figure 5), around half of our core valuation relates to BPT’s 20.21% interest in the SACB JV (operated by STO) while the Cooper Basin unconventional gas exploration upside is valued at $0.44/sh.

Figure 5: BPT valuation waterfall chart

1.80 0.06 1.60 0.44 1.58

1.40

1.20 0.13 0.02 1.00 0.07 0.04 0.04 0.80 0.11 0.16 0.09 0.60 0.44 0.40

0.20

0.00

Source: Company data, Credit Suisse estimates BPT trades on 9.1x FY15 P/E, a 33% discount to our Australian energy sector trading on 13.7x. The company pays a stable full year dividend of 2.25cps resulting in a 1.9% yield although we note BPT is a growth stock with significant capex requirements rather than a yield play. On an EV/boe basis, BPT trades on A$13.0/boe, broadly in line with the A$13.3/boe average for Cooper Basin peers Drillsearch, Senex Energy and Santos.

Figure 6: Cooper Basin E&P comps—EV/2P Reserves (A$/boe) 25.0

20.0

15.0

10.0

5.0

0.0 DLS BPT SXY STO

Source: Company data, Bloomberg

Beach Energy (BPT.AX / BPT AU) 6 30 May 2013

Holt valuation Applying key Credit Suisse Research assumptions through our proprietary HOLT framework results in a A$1.92 valuation. This valuation initially uses eight years of Credit Suisse Research estimates to drive CFROI forecasts, before proprietary algorithms determine the “rate of fade” towards the historical average. This is consistent with our OUTPERFORM rating.

Figure 7: HOLT valuation

Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 7 30 May 2013

Key risks Commodity prices and foreign exchange Lower-than-forecast oil and gas prices and a higher AUD/USD exchange rate will have a negative impact on our NPV valuation. Even though BPT has a policy to hedge both declining oil prices and unfavourable exchange rates, a period of sustained prices below our forecasts will negatively affect our valuation. Infrastructure Infrastructure is vital to commercialising oil and gas discoveries as it provides an access to market. Our valuation will be negatively impacted by the failure of BPT to gain access or develop its own infrastructure from its fields especially the unconventional resources in the Cooper basin. However, we view this as a low risk as BPT has interests in major infrastructure including the Moomba and Ballera processing facilities, gathering systems, the 180km Ballera to Moomba gas pipeline, the 659km Moomba to Port Bonython oil pipeline and the Port Bonython and Jackson oil facilities. Geological Oil and gas exploration is typically a high risk activity due to the risk of drilling ‘dry holes’ in which there is an insufficient quantity of oil or gas or issues with reservoir quality, e.g. lack of wellbore pressure or low permeability and porosity. While this is a risk for BPT, we believe the company has a strong knowledge of the Cooper basin which has resulted in an average 56% success rate in exploration and appraisal drilling over the past decade. In FY11 and FY12, BPT achieved a 19% increase in 2P reserves in both years. However, we highlight that the Cooper Basin unconventional gas exploration and appraisal programme has a higher degree of geological risk than conventional oil and gas as the REM shale formation is not well understood at this point in time. Negotiation with third parties The financial performance of BPT will also be affected by any unfavourable negotiations with the third parties such as gas sales agreements, negotiations for land access arrangements and terms of access to third-party facilities. Personnel risk Increasing wages will negatively impact BPT. Wage inflation in the Australian resources sector has been a key issue impacting project economics in recent years with Australian staff costs up to three times higher than the US or Asia. A shortage of skilled labour has arisen due to increased exploration activity in unconventional shale in the Cooper Basin, coal seam gas (CSG) in NSW and Queensland, and several LNG projects under construction in Gladstone and the NWS. Funding risks Oil and gas exploration and development is a capital intensive business. We forecast BPT to spend $450mn on capex in FY13, declining to $396mn in FY14 which we be funded by operating cashflow and a drawdown of existing debt facilities. Difficulty in securing the required funding for projects through equity sell-down/farm-in, debt financing and/or equity raisings will impact the successful development of BPT’s projects. Government regulations Our valuation may be materially impacted by any changes in Government royalties and taxation regulations in Australia or overseas. However, we note that due to a significant ~$1bn starting base for BPT’s existing Cooper/Eromanga Basin projects (deductible against any taxable profits), we do not expect BPT to incur any PRRT payments in the short to medium term.

Beach Energy (BPT.AX / BPT AU) 8 30 May 2013

Company overview BPT is an ASX100 oil and gas exploration and production company with interests in over 300 exploration and production tenements in Australia, USA, Egypt, Tanzania, Romania, New Zealand and Papua New Guinea. However, the company’s primary focus is the Cooper and Eromanga Basins which accounts for ~98% of 2P reserves and FY13 forecast production of 8.1 mmboe. The company’s history dates back to the early 1960s when it was established by the late Dr Reg Sprigg, who was previously a technical advisor to Santos and a highly regarded Australian oilman, geologist, explorer. Today, BPT is led by Managing Director Reg Nelson who joined BPT in 1992. Mr Nelson has over 40 years’ experience as an exploration geophysicist in the minerals and petroleum industries and was chairman of the Australian Petroleum Production and Exploration Association (APPEA) from 2004 to 2006. BPT’s Cooper Basin assets comprise a 20.21% interest in the South Australian Cooper Basin Joint Venture (SACB JV), a 23.2% interest in the South West Queensland Joint Venture (SWQ JV) and 40-75% equity interests in the oil rich Western Flank. BPT is also a major player in the exploration and appraisal of unconventional shale gas resources in the Nappamerri Trough, Cooper Basin through its interests in PEL 218, ATP 855 and the SACB JV. While Cooper Basin shale gas is currently uncommercial, positive steps have been made with the commissioning of the Moomba-191 (BPT 20.21%) vertical gas well in September 2012 which is currently flowing at a rate of ~2.0 MMscfd. In May 2013, Chevron completed Stage 1 of a farm-in agreement for up to 60% of BPT’s interests in PEL 218 and ATP 855 for a total consideration (including cash and carry) up to US$349mn. We believe the Chevron farm-in highlights the attractiveness and potential value of unconventional shale gas in Australia while providing a good valuation benchmark for what is currently an uneconomic resource. Outside Australia, BPT is forecast to produce 160 mbbl of oil in FY13 from its interests in two Production Sharing Contracts (PSCs) in Egypt. The company also holds a 100% interest in the prospective Lake Tanganyika South Block in Tanzania where management is targeting ‘big oil’, e.g., 200 mmboe wells with prospects and leads identified mid-2013.

Figure 8: Beach Energy asset location map

Source: Company presentation

Beach Energy (BPT.AX / BPT AU) 9 30 May 2013

Reserves and Resources BPT had 92.8mmboe of 2P reserves as at 30 June 2012, equating to an acceptable reserve life ratio of 12.4 years. Management is seeking to add 16.7 mmboe of 2P reserves in FY13 mainly through further infill development drilling at the SACB JV to convert 2C contingent resources into ~10.0 mmboe 2P reserves.

Figure 9: BPT reserves and resources (as at 30 June 2012) 2P Reserves as at 30 June 2012 2C Contingent Resources as at 30 June 2012 Area Oil Gas Liquids Gas Oil Equiv. Area Oil Gas Liquids Gas Oil Equiv. (MMbbl) (MMboe) (PJ) (MMboe) (MMbbl) (MMboe) (PJ) (MMboe) Cooper & Eromanga Basins 17.7 12.1 356.3 91.0 Cooper Basin (Conventional) 7.0 17.1 437.7 99.3 United States 0.2 0.0 0.3 0.3 Cooper Basin (Unconventional) 0.0 3.6 1895.0 329.4 Egypt 1.5 0.0 0.0 1.5 Other 11.6 3.3 133.7 37.9 Total 19.4 12.1 356.6 92.8 Total 18.6 24.0 2466.4 466.6 Source: Company data Around 98% of the company’s reserves are located in the Cooper and Eromanga Basins, of which, two-thirds consists of natural gas. BPT also has a significant 466.6 mmboe of 2C contingent resources, of which 71% relates to the company’s unconventional Cooper Basin exploration.

Figure 10: 2P Reserves as at 30 June 2012 Figure 11: 2C contingent resources as at 30 June 2012

Egypt Other 2% 8% Cooper Basin Conventional 21%

Cooper & Eromanga Basins 98% Cooper Basin Unconventional 71%

Source: Company data Source: Company data Through an active exploration drilling campaign (e.g. 89 wells drilled in FY12 with a high 78% success rate), BPT has been able to consistently grow its 2P reserves over time. Note the decrease in reserves FY09 was due to the divestment of the Tipton West field.

Figure 12: 2P reserves growth over time Figure 13: 2P reserves by product as at 30 June 2012 160 140 120 100 Oil 21% 80

60 Gas Liquids 40 Gas 13% 20 66% 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

2P Reserves (MMboe)

Source: Company data Source: Company data

Beach Energy (BPT.AX / BPT AU) 10 30 May 2013

Production profile We forecast production of 8.1 mmboe in FY13, up from 7.5 mmboe in FY12 due to higher oil production from the BPT operated Western Flank following the commissioning of three oil pipelines to the Moomba facility during FY13, lifting oil production by 10,000 bpd (net). We also expect improved uptime from the SACB JV in the June 2013 quarter. In the nine months to 31 March 2013, BPT’s production comprised 45% oil, up from 37% in FY12 and 32% in FY11 due to the tie in of three new oil pipelines in the Western Flank. Oil production is sold based on Brent crude pricing which provides a solid operating netback (including opex, royalties and transport costs) of A$85/bbl based on a A$110/bbl oil price. Around 98% of BPT’s production relates to its interests in the various Cooper-Eromanga basin acreage with the remaining 2% from two Production Sharing Contracts in Egypt.

Figure 14: Production by region (mmboe) Figure 15: Production by product (mmboe) 10.0 10.0 9.0 9.0 8.0 8.0 7.0 7.0 6.0 6.0 5.0 5.0

4.0 4.0

in mmboe in in mmboe in 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 FY10 FY11 FY12 FY13F FY14F FY15F FY10 FY11 FY12 FY13F FY14F FY15F

Cooper and Eromanga Basins Egypt Sales Gas & Ethane Crude oil Condensate LPG

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates BPT’s largest asset accounting for around two-thirds of group production is its 20-23% interest in the SACB and SWQ joint ventures (operated by STO). STO has guided towards a 30% increase in gas production from 100PJ in 2012 to 130PJ in 2015 through pad drilling and infill drilling. Based on current reserves and data available, we expect BPT to produce 9.7mmboe in FY15 before gradually declining through natural field decline. In reality however, the use of pressure pumps and infill drilling will slow decline rates while continued exploration drilling should lead to reserve additions and increased production.

Figure 16: Cooper Basin production by field (mmboe) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1H11 2H11 1H12 2H12 1H13 2H13F 1H14F 2H14F 1H15F 2H15F

SACB JV SWQ JV PEL 91 PEL 92 PEL 106B and PEL 107 PEL 104-111

Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 11 30 May 2013

Financial profile Capex and funding requirements We forecast FY13 capex of $450mn, at the top end of management’s guidance range of $400-450mn. The company’s guidance for FY13 capex by development and exploration spend and region is shown below (Figure 17).

Figure 17: FY13 capex guidance Forecast reserve Forecast Forecast Forecast Seismic additions $m Wells 2D - km 3D - km2 Mmboe Development Cooper Basin - non SACB JV 50-55 12-15 Cooper Basin - SACB/SWQ JV 140-145 45-55 10.0 International 5-10 2-4 Total Development 195-210 Up to 74 0 0 10.0 Exploration Cooper Basin - non SACB JV 30-40 16-21 250 1,500 3.3 Cooper Basin - SACB/SWQ JV 15-20 5-10 0.4 Other Australasia 5 2-3 1.7 Unconventional 135-145 10-15 670 International 15-25 3-5 2,100 1.3 New Ventures and Other 5 0 Total Exploration 205-240 Up to 54 3,020 1,500 6.7 TOTAL 400-450 Up to 128 3,020 1,500 16.7

Source: Company data, Credit Suisse estimates BPT is expected to provide FY14 capex guidance at the FY13 results in August 2013. In the interim, we forecast capex to moderate slightly to $396mn in FY14 as development spending in the SACB/SWQ JVs increases to help grow gas production by 30% from 2012 to 2015 through pad and in-fill drilling. However, this higher level of development spend should be partially offset by lower exploration spend in unconventional shale due to the US$95mn carry from Chevron in PEL 218 following the recent farm-in agreement.

Figure 18: Capex and free cash flow (A$mn) 500

400

300

200

100

0

-100

-200 FY10 FY11 FY12 FY13F FY14F FY15F

Capex Free cash flow

Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 12 30 May 2013

Based on our cash flow and capex forecasts below (Figure 19), we believe BPT has adequate operating cash flow and cash on hand to meet its capex requirements during the forecast period. However, in the event that BPT’s unconventional acreage proves to be commercial around FY16-17, more funds may be required through either another farm-out agreement or equity or debt raising.

Figure 19: BPT cash flow forecasts Cashflows FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F Operating cashflows A$m 173.3 128.5 184.5 218.2 290.3 307.7 297.9 299.4 Capex A$m 461.7 147.1 153.7 256.6 451.3 396.0 311.4 112.3 Free cash flow A$m -288.5 -18.6 30.9 -38.4 -161.0 -88.3 -13.5 187.1 Other investing cashflows A$m 294.3 60.9 -17.8 -81.1 92.9 -0.6 -0.6 -0.6 Financing cashflows A$m -251.2 -6.8 -6.8 324.2 56.6 -28.6 -28.7 -28.9 Net increase in cash A$m -245.3 35.5 6.3 204.7 -11.6 -117.5 -42.8 157.6 Cash at end of the year A$m 136.2 169.9 173.3 378.5 367.1 249.6 206.7 364.4 Source: Company data, Credit Suisse estimates Debt and gearing At 30 June 2013, we forecast BPT to have net cash of $175mn consisting of $367m in cash on hand and debt of $192m. BPT also has access to a $150mn multi-option financing facility which we assume has been drawn to $75mn. BPT’s debt primarily relates to a $150mn convertible bond issue completed on 3 April 2012. The notes carry a fixed coupon of 3.95% p.a. payable semi-annually for five years. We forecast BPT to have sufficient operating cash flow and cash on hand to repay the $150mn convertible bonds in March 2017. FY13 gearing (net debt/net debt+equity) is a healthy -11.3% based on its $175mn net cash position and we project it to remain net cash during the forecast period (Figure 20).

Figure 20: BPT net debt and gearing Gearing FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F Net Debt A$m -136.2 -169.9 -173.3 -265.1 -175.5 -58.0 -15.1 -172.8 Net Debt / Equity % -10.2% -12.4% -13.6% -16.4% -10.2% -3.1% -0.8% -8.2% Net Debt / (Equity+Net Debt) % -11.4% -14.1% -15.8% -19.7% -11.3% -3.2% -0.8% -8.9% Interest cover (x) (EBITDA) x -29.0x -791.4x -8.6x -44.5x 159.5x 37.0x 79.9x 110.2x Interest cover (x) (EBIT) x -19.4x -184.0x -48.3x -28.5x 95.8x 22.1x 49.8x 68.1x Source: Company data, Credit Suisse estimates

Figure 21: We forecast BPT to remain net cash (A$mn) 0 0.0%

-50 -5.0% -100 -10.0% -150 -15.0% -200

-250 -20.0%

-300 -25.0% FY10 FY11 FY12 FY13F FY14F FY15F

Net Debt Gearing

Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 13 30 May 2013

Earnings forecasts BPT is due to report FY13 results on 27 August 2013. We forecast FY13 underlying NPAT of $147mn, up from $123mn in FY12 due to higher production of 8.1 mmboe and slightly higher oil and gas prices. We expect EBIT margins to remain stable around 27-30% during the forecast period and based on our current forecasts with production peaking in FY15, BPT is expected to generate peak earnings in FY15 with NPAT of $161mn. On our estimates, BPT trades on FY15 P/E of 9.1x, a 33% discount to peers WPL, ORG, STO and OSH trading on an average 13.7x.

Figure 22: BPT earnings forecasts Consolidated P&L FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F Gas and Gas Liquids A$m 208.9 195.9 196.2 196.3 201.7 241.7 262.1 270.1 Crude oil A$m 309.9 215.1 220.5 314.3 385.3 402.1 382.8 356.1 Third party product sales A$m 62.5 76.5 79.7 108.0 100.8 106.4 106.4 106.4 Total product sales A$m 581.4 487.5 496.4 618.6 687.8 750.2 751.3 732.6 Other revenue A$m 2.2 1.7 1.8 0.7 3.7 3.7 3.7 3.7 Other income A$m 395.4 58.7 26.0 45.3 10.0 20.0 20.0 20.0 Total revenue A$m 978.9 547.9 524.3 664.6 701.4 773.8 775.0 756.3 Total cash cost of production A$m 232.3 221.8 215.5 205.6 207.0 200.6 212.7 202.3 Third party product purchases A$m 64.5 72.7 79.7 104.3 101.3 101.3 101.3 101.3 (Increase)/decrease in product stock A$m -5.9 6.0 22.1 2.5 2.0 0.0 0.0 0.0 Other expenses A$m 179.6 98.6 229.0 48.8 82.5 119.7 99.7 99.7 Total expenses A$m 470.4 399.1 546.4 361.3 392.8 421.6 413.7 403.3 EBITDA - underlying A$m 508.5 148.8 -22.1 303.3 308.6 352.3 361.2 352.9 Depreciation and depletion A$m 169.4 114.2 101.7 108.7 123.3 142.4 135.7 134.8 EBIT - underlying A$m 339.1 34.6 -123.8 194.6 185.3 209.9 225.5 218.1 Profit before tax A$m 321.6 34.4 -121.3 187.8 187.3 219.4 230.0 221.3 Income tax expense A$m -61.2 -1.3 23.8 -23.6 -57.6 -65.8 -69.0 -66.4 Royalty-related taxation expense A$m -59.7 -54.2 -65.8 -37.0 -31.1 0.0 0.0 0.0 OEI A$m 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Reported NPAT A$m 260.4 33.4 -96.8 165.1 129.7 153.6 161.0 154.9 Significant items A$m -199.1 7.7 139.5 -42.2 17.2 0.0 0.0 0.0 NPAT underlying A$m 61.3 41.1 42.7 122.9 146.9 153.6 161.0 154.9 Normalised cash NPAT A$m 429.8 147.6 4.9 273.8 253.0 295.9 296.7 289.7 Source: Company data, Credit Suisse estimates Petroleum Resource Rent Tax On 18 March 2012, the Senate enacted legislation to extend the PRRT regime to include all onshore and offshore oil and gas projects from 1 July 2012, thereby impacting BPT’s operations in the Cooper and Eromanga basin. Under the PRRT regime, onshore oil and gas projects are subject to a 40% profits related tax after deducting operating, development and exploration costs and state royalties. However, due to a significant ~$1bn starting base for BPT’s existing Cooper/Eromanga basin projects (deductible against any taxable profits), BPT is not expected to incur any PRRT payments in the short to medium term. Exxon Mobil Royalty In January 2012, BPT renegotiated a legacy royalty payment owing to Exxon Mobil relating to the acquisition of Delhi Petroleum in 2007. BPT has agreed to pay Esso Australia Resources a certain percentage of the net cash flow (before corporate tax) from the Cooper and Eromanga Basin assets, subject to a minimum of $40mn over the first five years. We assume BPT pays a 4% royalty to Esso Australia Resources until 31 Dec 2030.

Beach Energy (BPT.AX / BPT AU) 14 30 May 2013

Royalties and taxes We assume an effective State royalty of 7% and a 30% corporate tax rate. The nominal State royalty is 10% of revenue after levy payable on the wellhead valuation. However, after allowable deductions we assume a life of well average royalty rate of 7%. Dividend policy BPT has a policy of paying fully franked interim and final dividend every year. We have assumed that the company will continue paying 0.75cps and 1.50cps in 1H and 2H respectively of each financial year which equates to a ~20% payout ratio. BPT trades on 1.9% dividend yield although we note the company is not a yield play. Sensitivities Below we highlight BPT’s earnings sensitivity to changes in the AUD/USD exchange rate, a +/- $10/bbl change in Brent crude oil prices and east coast gas prices.

Figure 23: Foreign exchange rate sensitivity (parity vs 0.85) CS Base Case Downside Upside FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 AUD/USD 0.98 0.95 0.93 1.00 1.00 1.00 0.85 0.85 0.85

Revenue 750.2 751.3 732.6 738.9 725.6 698.2 826.7 807.6 773.2 EBITDA 352.3 361.2 352.9 342.0 337.8 321.7 422.2 412.5 389.8 EBIT 209.9 225.5 218.1 199.7 202.8 188.3 279.2 275.3 253.3 Net Income 153.6 161.0 154.9 146.5 145.0 133.4 202.2 197.0 181.9 EPS 12.2 12.7 12.2 11.6 11.4 10.5 16.0 15.5 14.3 Source: Credit Suisse estimates

Figure 24: Oil price sensitivity (-/+ US$10/bbl) CS Base Case Downside Upside FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 Brent (US$/bbl) 110.0 103.8 97.5 100.0 93.8 87.5 120.0 113.8 107.5

Revenue 750.2 751.3 732.6 707.5 708.4 690.0 792.9 794.2 775.2 EBITDA 352.3 361.2 352.9 312.9 321.6 313.4 391.7 400.9 392.5 EBIT 209.9 225.5 218.1 170.5 185.8 178.5 249.3 265.2 257.7 Net Income 153.6 161.0 154.9 126.0 132.6 125.6 181.2 189.5 184.2 EPS 12.2 12.7 12.2 10.0 10.5 9.9 14.3 14.9 14.5 Source: Credit Suisse estimates

Figure 25: Gas price sensitivity (A$4/GJ flat vs +A$1/GJ p.a.) CS Base Case Downside Upside FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 Gas price (A$/GJ) 4.75 5.06 5.79 4.00 4.00 4.00 5.75 6.06 6.79

Revenue 750.2 751.3 732.6 728.9 718.7 681.1 778.7 781.9 761.4 EBITDA 352.3 361.2 352.9 333.1 332.0 306.7 377.8 388.7 378.7 EBIT 209.9 225.5 218.1 190.8 196.3 171.9 235.5 253.0 243.9 Net Income 153.6 161.0 154.9 140.2 140.2 121.6 171.5 180.7 174.1 EPS 12.2 12.7 12.2 11.1 11.1 9.6 13.6 14.3 13.7 Source: Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 15 30 May 2013

Asset description BPT operates ~20 oil fields on the Western Flank of the Cooper/Eromanga and six gas discoveries, of which two are currently in production. The company also holds a 20.21% interest in the South Australian Cooper Basin Joint Venture (“SACB JV”) and a 23.2% interest in the South West Queensland Joint Ventures (“SWQ JV”) operated by Santos. Western Flank PEL 91 and PEL 92 The oil rich Western Flank primarily consists of PEL 91 (BPT 40%, Operator) and PEL 92 (BPT 75%, Operator) and as the name suggests, is located on the western flank of the Cooper/Eromanga Basin in South Australia, around 90km from the Moomba processing facility. The primary reservoirs in PEL 91 and PEL 92 are the Cretaceous Namur and Jurassic Birkhead sandstones, producing a light crude oil with an API of 46.7. Oil produced from PEL 91 and PEL 92 in the Western Flank is transported by truck and pipeline to the Moomba plant for processing along with gas and liquids produced from surrounding areas such as the SABC JV and SWQ JV. However, during FY13 BPT completed the tie-ins of the 70km Growler-Lycium, the 74km Lycium-Moomba and Bauer- Lycium flowlines resulting in oil production from the Western Flank increasing by 10,000 bpd (net to BPT). The Western Flank benefits from strong economics due to sales in Brent crude (CS forecast US$112/bbl in 2013) and a high netback (including opex, royalties and transportation) of A$85/bbl based on a Brent crude oil price of A$110/bbl. BPT has a strong understanding of the geology in the Western Flank and has achieved a high ~90% success rate during FY13. Since the Sellicks discovery in PEL 92 in 2002, most oil finds have been around 600 kbbl. BPT currently has two rigs drilling in the Western Flank, one in PEL 91 and the other in PEL 92. Since the Chilton discovery in 2009, a total of eight small oil fields have been discovered in PEL 91. The largest discovery in PEL 91 is the Bauer field which was discovered in August 2011 with 3.5 mmboe gross recoverable oil. Historically, production from PEL 91 has been trucked to the Moomba processing plant which, during periods of heavy flooding, resulted in lower production. However in April 2013, BPT completed the commissioning of a 10,000 bpd pipeline from Bauer to Lycium which will increase production and reduce the impact of flooding. BPT has also installed pressure pumps to help maintain production rates from the PEL 91 oil fields to help offset steep declines rates. In the March 2013 quarter, PEL 91 produced 110 kbbl (net to BPT), up 73% QoQ due to the connection of Bauer-5, 6, 7 and 8 and optimised trucking. At PEL 92, production rose 20% QoQ to 350 kbbl (net to BPT) as the Callawonga to Lycium flowline became operational.

Beach Energy (BPT.AX / BPT AU) 16 30 May 2013

Figure 26: Western Flank, Cooper Basin

Source: Company data, Credit Suisse estimates PEL 104 and PEL 111 BPT holds a 40% interest in PEL 104 and PEL 111 which are operated by Senex Energy (60%). PEL 104 and PEL 111 are located adjacent to and north east of PEL 91. These licences focus on the mid Jurassic Birkhead formation and contain the large Snatcher and Growler oil discoveries. In March 2013 quarter, production from the Senex operated PEL 104 and PEL 111 was 160 kbbl, down 7% QoQ due mainly to natural decline in the Growler oil field.

Beach Energy (BPT.AX / BPT AU) 17 30 May 2013

Figure 27: PEL 104 PEL 111 (BPT 40%)

Source: Company presentation PEL 106B and PEL 107 BPT is the operator of PEL 106B and PEL 107 and holds a 50% interest along with Drillsearch (50%). First production commenced in FY12 from the Middleton/Brownlow fields with initial flowrates of 25 MMscfd (15 Tjd of sales gas and 325 bbl/d of LPG and condensate. In March 2013, BPT and Drillsearch entered into a new Gas Sales Agreement (GSA) with the SABC JV which provides for the sale of 10 Bcf of raw gas from PEL 106B on a firm basis, for three years. BPT may sell up to 35 MMscfd of raw gas with raw gas sales up to 10 Bcf on a firm supply and purchase basis, and additional quantities over and above 10 Bcf supplied on an as-available basis and at a rate up to 35 MMscfd. We assume a gas price of A$4.75/GJ in FY14. BPT has a ~$7mn, four well exploration programme for PEL 106B in FY13, of which, three wells have already been drilled although they were unsuccessful. The first well (Coorabie- 1) was cased and suspended for further testing after gas failed to flow to the surface while the second and third wells (Rosetta-1 and Destrees-1) were plugged and abandoned due to poor reservoir quality despite gas shows. The fourth and final well (Euler-1) is due to be drilled in June 2013.

Beach Energy (BPT.AX / BPT AU) 18 30 May 2013

Figure 28: PEL 106B and PEL 107 (BPT 50%)

Source: Company presentation Cooper and Eromanga Basin SACB and SWQ Joint Ventures BPT holds a 20.21% interest in the South Australian Cooper Basin Joint Venture (SACB JV) operated by Santos (66.6%). The company also holds a 23.2% interest in the South West Queensland Joint Ventures (SWQ JV) operated by Santos (60%). The JV also includes major infrastructure including the Moomba and Ballera processing facilities, gathering systems, the 180km Ballera to Moomba gas pipeline, the 659km Moomba to Port Bonython oil pipeline and the Port Bonython and Jackson oil facilities. BPT acquired its interests in the SACB and SWQ JVs following the acquisition of Delhi Petroleum for A$574m in 2006. The joint venture covers an area of 26,800 sq. km and straddles the SA and QLD borders. The Cooper Basin is Australia’s largest onshore oil and gas project with ~190 gas fields and ~115 oil fields currently on production, which in turn consist of ~800 gas wells and ~400 oil wells. Gas and oil produced by the Cooper basin fields is transported by pipelines and flowlines either to the Moomba production facility in South Australia or the Ballera production facility in Queensland. Natural gas liquids are recovered via a refrigeration process in the Moomba plant and transported by pipeline with stabilised crude oil and condensate to Port Bonython near Whyalla in South Australia. Ethane is piped to Qenos in Sydney while sales gas is transported by pipelines from Moomba to Adelaide and Sydney and to Mt Isa and Brisbane.

Beach Energy (BPT.AX / BPT AU) 19 30 May 2013

Figure 29: SACB JV and SWQ JV location map

Source: Company presentation The Cooper Basin is a mature hydrocarbon region with the first gas discovery made in 1963 at Gidgealpa. Gas production from the JVs peaked at 700 MMscf/d during 1999- 2002 and has since declined to ~250 MMscfd. The first oil discovery in the Cooper Basin was the Tirrawarra field in 1970 although production did not start until 1982. Oil production peaked in 1989 at ~29,000 bpd and has also declined sharply to ~6,000 bpd. In comparison to US shale which is typically drilled on 40-80 acre spacing, the Cooper Basin is under-drilled or under-explored with wells drilled on 200 acre spacing (e.g. further apart). However, the JV partners have recently been undertaking in-fill drilling using tighter 40 acre downspacing to increase recovery rates from mature fields and convert ~10 MMboe of 2C contingent resources into 2P reserves each year. Santos is guiding towards a 30% increase in gas production from 100 PJ in 2012 to 130 PJ in 2015 from the Cooper Basin JVs through pad drilling and in-fill drilling.

Beach Energy (BPT.AX / BPT AU) 20 30 May 2013

Figure 30: Infill drilling—40 acre v. 200 acre spacing

Source: Company presentation The Cooper Basin JV also contains substantial unconventional shale gas resources with interest in the play gaining momentum following production from the Moomba-191 (SACB JV) vertical gas well in October 2012. While the Moomba-191 well is considered uneconomic due to its ~$15mn development cost requiring a breakeven (NPV = 0) gas price of $15/GJ, flowrate and pressure data from the well should prove useful in the development of other shale gas wells in the basin. We discuss the potential of unconventional shale gas in the Cooper Basin further below. Cooper Basin unconventional gas Along with larger peer STO, BPT is a major player in the exploration and potential development of unconventional shale gas resources in the Cooper Basin. BPT has exposure to unconventional shale gas through its 20.21% interest in SACB JV which in August 2012, discovered the Moomba-191 vertical shale gas well which flowed at an initial rate up to 3.0 MMscf/d in Sept-12 and is currently flowing around ~2.0 MMscf/d. While the Moomba-191 well was completed and brought onto production quickly, the well is considered uneconomic due to high capex of ~$15mn for the well, combined with the prevailing gas price of ~$4/GJ and a current flowrate of ~2.0 MMscf/d. However, we note Moomba-191 is a pilot well and continues to provide BPT (and STO) with important flowrate data. BPT also has exposure to unconventional shale gas through PEL 218 (60%) and ATP 855 (36%). We note that BPT’s interest in PEL 218 and ATP 855 assume that Chevron elects to acquire 60% of BPT’s interest in the two blocks for up to US$349mn. Following FIRB approval in May 2013, Stage 1 of the farm-in was completed with BPT receiving US$95mn in cash and a carry of US$95mn in PEL 218.

Beach Energy (BPT.AX / BPT AU) 21 30 May 2013

Figure 31: BPT unconventional shale gas acreage

Source: Company data In FY13, BPT expects to spend capex of $135-145mn on unconventional drilling and fracture stimulation as it seeks to increase its unconventional resource base and assess the commerciality of the Nappamerri Trough. To date, BPT has drilled eight vertical wells and one horizontal well (Holdfast-2) while fracture stimulating five wells. While it is still very early days to determine the commerciality of Cooper Basin’s unconventional shale gas, the flowrates to date have varied significantly and may be below market expectations, in our view. We highlight two vertical wells below:

■ In January 2013, the Moonta-1 vertical well (PEL 218) flowed a maximum controlled rate of 2.6 MMscf/d although five months later this has since declined sharply to 0.5 MMscf/d.

■ Similarly, in February 2013, the Halifax-1 vertical well (ATP 855) flowed at a constrained rate of 2.2 MMscf/d, peaked at 4.2 MMscf/d in April and is now flowing at a rate of 1.1 MMscf/d after 14 stimulation stages. However, we stress that it is premature to draw any conclusions from the exploration programme to date as BPT continues to experiment with the location of wells, the number and spacing of fracture stimulation stages, deals with the relatively high 30-40% CO2 and low liquids content, very hot temperatures above 120 degrees Celsius and various choke sizes to restrict flow rates.

Figure 32: Proposed drilling and fracture stimulation schedule in the Nappamerri Trough

Source: Company presentation

Beach Energy (BPT.AX / BPT AU) 22 30 May 2013

In March 2013, BPT drilled its first horizontal well (Holdfast-2) in PEL 218 to a depth of 4,210 metres, penetrating a 600 metre lateral section of the Murteree Shale. The well is due to be fracture stimulated in July 2013 and we look forward to observing the flowrates from this horizontal well. However, management has stressed it is still assessing the geology of the REM formation and that investors should not draw firm conclusions around sustainable flowrates and EURs from the results of this first horizontal well. In ATP 855, BPT has only one vertical well to date (Halifax-1) although is planning a six well programme including two horizontals in FY14 to around 4,500 metres.

Figure 33: Cooper Basin unconventional well locations and fracture stimulation stages

Source: Company data How do we value unconventional shale gas resources? We concede that it is difficult to accurately value BPT’s 329 mmboe of 2C unconventional resource which are currently uncommercial. However, we believe the recent Chevron farm-in agreement with BPT for a 60% interest in PEL 218 and ATP 855 provides a good benchmark. The Chevron farm-in consideration (cash and carry) of US$349mn values PEL 218 and ATP 855 at US$223,500/sq km. We have applied this transaction multiple to BPT’s 2,476 sq. km of unconventional acreage across PEL 218, ATP 855 and SACB JV to obtain a valuation of $553mn or $0.44/sh. We would also argue that BPT’s unconventional acreage in the SACB JV is more valuable than PEL 218 and ATP 855 as it is closer to existing pipeline infrastructure and the Moomba gas processing facility.

Beach Energy (BPT.AX / BPT AU) 23 30 May 2013

Figure 34: Chevron farm-in transaction values BPT’s unconventional gas acreage at US$553m or A$0.44/sh Area sq km (100%) BPT interest before Chevron farm-in PEL 218 1,600 100.0% ATP 855 1,670 60.0% SACB JV 7,100 20.2% Total area net to BPT 10,370

Area sq km (BPT) BPT interest post Chevron farm-in PEL 218 640 40.0% ATP 855 401 24.0% SACB JV 1,435 20.2% Total area net to BPT 2,476

Chevron farm-in details Area sq km (Chevron) Interest acquired by Chevron PEL 218 960 60.0% ATP 855 601 36.0% 1,561

Consideration paid by Chevron (US$mn) 349 Transaction multiple (US$'000/sq km) 224

Implied BPT unconventional gas valuation (US$mn) 553 Implied BPT unconventional gas valuation (A$/sh) 0.44 Source: Company data, Credit Suisse estimates Excluding the BPT-Chevron farm-in transaction, there have been few other Cooper Basin unconventional shale gas deals for us to draw upon. The most relevant is the BG farm-in to Drillsearch acreage in July 2011. Under this farm-in agreement, BG agreed to acquire a 60% interest in DLS’s ATP 940P covering over 2,000 sq km of the Central Cooper Basin Nappamerri Trough Shale Gas Fairway. The BG farm-in implied a multiple of $108,333/sq km. We believe the $115,000/sq km differential between the BG farm-in and the recent Chevron farm-in may be explained by (1) the number of wells drilled in the respective blocks, (2) the geological knowledge gained over the past ~2 years, (3) the location of the blocks in the Nappamerri Trough (e.g. perceived sweet spots where the Permian shale is thickest), (4) proximity to existing pipeline and processing infrastructure and (5) higher gas prices. What is required for Cooper Basin shale gas to break even? We estimate that in order for Cooper Basin unconventional shale gas to be break-even, BPT would need (1) to reduce development capex to A$10mn per well, (2) initial flow rates above ~5.0 MMscf/d with an EUR per well of ~3.0 Bcf and a domestic gas price above A$8/GJ. In our view, Cooper Basin unconventional gas may prove to be commercial in time due to the following factors:

■ Higher gas prices of A$8-10/GJ from 2015: As discussed, we expect Australian east coast domestic gas prices to double to A$8-10/GJ by 2015 as gas demand triples from 700 PJ in 2012 to 2,200 PJ in 2015 due to the ramp-up the three LNG projects in Gladstone. Such higher prices should greatly improve Cooper Basin shale economics.

■ Increased flowrates: Improved flowrates of 5 MMscf/d and Estimated Ultimate Recoveries (EURs) of 4 Bcf may also be achieved as BPT gains a better understanding of the geology in the Nappamerri Trough gained through E&A drilling. The main target zones are the Roseneath Shale, Epsilon Formation, Murteree Shale (REM) and the Patchawarra Formation. As mentioned, BPT is currently experimenting

Beach Energy (BPT.AX / BPT AU) 24 30 May 2013

with the number and spacing of fraccing stages and choke sizes to deal with very high temperatures.

■ Lower capex per well of $10mn: Decreased well costs should be achieved through the development of a larger, more established oilfield services industry in Australia to provide directional drilling and fraccing services at more competitive prices (see below). A major factor behind high capex perm well in the Cooper Basin versus the US is the very small and less developed nature of the Australian oilfield services industry. As shown in Figure 35 below, Australia has substantially less directional drilling rigs and frac crews than the US resulting in higher development costs. We expect that drilling and completion costs will decline over time as more horizontal and vertical rigs and fraccing crews are available in Australia.

Figure 35: Australian shale service sector immature

Source: Strike Energy Company Presentation, 5 September 2012 PEL 218 (~1,600 km2) BPT commenced its exploration programme at PEL 218 with the drilling of Holdfast-1 and Encounter-1 shale gas well in late 2011 targeting the Roseneath-Epsilon-Murteree (REM) shale sequence in the Cooper Basin. The drilling at Holdfast-1 resulted in a 353 metre intersection at the REM which was confirmed to be substantially thick and later interpreted to be fully gas saturated. During June 2011, the reservoir stimulation of the Holdfast-1 was undertaken in seven stages targeting the REM section and Patchawarra Formation resulting in an initial flow rate of 2.0 MMscf/d (32/64 inch choke) and a stabilised rate of 1.8 MMscf/d later on. The results of both the wells and flow testing encouraged BPT to book a gross 2 Tcf of contingent resource for both Holdfast-1 and Encounter-1. The results were encouraging enough for BPT to drill further and as a result Moonta-1, a vertical exploration well in PEL 218 was spudded in January 2012 and drilled to the base of the Patchawarra Formation to a depth of 3,810m. The logs indicated gas saturation over more than 1,000 metres throughout the Permian target zone confirming the existence of a BCG play across the Beach acreage in the Nappamerri Trough. This entire activity was a part of the bigger unconventional shale and BCG campaign involving at least five vertical wells in 2012 including Streky-1 as the second well reaching a total depth of 3,821 metres. During mid-2012, the flow stimulation of Encounter-1 was undertaken in two phases which was earlier delayed in 2011 due to the mechanical problem. Both the stages delivered a combined rate of over 2 MMscfd.

Beach Energy (BPT.AX / BPT AU) 25 30 May 2013

Later in second half of 2012, Marble-1, an unconventional vertical exploration well in PEL 218, spudded on 30 Sep 2012 by the new Ensign 965 rig imported from USA, reached a total depth of 3,962 metres and Boston-1 reached a total depth of 3,755 metres. Both the wells were expected to be part of the March/April batch stimulation programme. At the same time, a three-well fracture stimulation programme on Moonta-1, Streaky-1 and Halifax-1 also commenced. While fracture stimulation of Moonta-1 was done over ten stages followed by flow testing in mid-December 2012, Streaky-1 completed its fracture stimulation over nine stages with flow testing expected to commence in early Feb 2013. At the same time, Holdfast-2, the first horizontal well of the campaign, spudded on early December 2012, reached target depth of 4,210 metres in March 2013 and is expected to be fracture stimulated in July 2013 with the number of stages still to be finalised. The results of Holdfast-2 will be very useful in the drilling of the next horizontal well, Encounter-2. ATP 855 (~1,670 km2) ATP 855 is an extension of PEL 218 to the northeast in the Nappamerri Trough. In 2012, the joint venture partners BPT and Icon Energy (40%) decided to accelerate the unconventional exploration programme with the spudding of the Halifax-1 vertical well in August 2012. Halifax-1 is located ~12km north-east of Encounter-1 and was expected to be used to identify the best zone for a future horizontal well. The well reached a total depth of 4,267 metres in October 2012 before undergoing a 14 stage fracture stimulation through the Permian target zone. Flowback started on 11 February 2013 and although it was regularly choked back due to temperature constraints, it reached a peak rate of 4.5 MMscfd falling to 2.0 MMscfd for the month of March while currently flowing at 1.1 MMscfd. As mentioned, BPT is planning a ~6-well programme including ~2 horizontals in FY14 to around 4,500 metres. On 26 May, the Hervey-1 vertical well, located 30km east of Halifax- 1 was spudded and will be drilled to over 4,200 metres. The next vertical well is expected to be Keppel-1, located ~25km north east of Halifax-1 and could be one of the deeper wells in the programme.

Beach Energy (BPT.AX / BPT AU) 26 30 May 2013

Figure 36: PEL 218 and ATP 855

Source: Company presentation Chevron farm-in deal In February 2013, BPT entered into a farm out agreement with Chevron whereby it will transfer 60% of its interest in PEL 218 (BPT 100%) and ATP 855 (BPT 60%) to Chevron for up to US$349mn in two stages for several years.

Figure 37: Details of the transaction Stage 1 Fields Stage 2 Post Stage 2 Conditions to be met (Completed)

Initial 30% Additional 30%  All Government Approvals including FIRB

US$ 36 million US$ 41 million  Approval and registration of the agreement by Commitment bonus PEL 218 cash cash government authorities in South Australia of US$35 million US$ 95 million US$ 47 million  Approval and registration of the transfers of the carry cash interests by relevant authorities for each stage

 All Government Approvals including FIRB Initial 18% Additional 18%  Indicative approval of the transfers of interests by ATP 855 government authorities in Queensland US$ 59 million US$ 36 million  Approval and registration of the transfers of the cash cash interests by relevant authorities for each stage

Source: Company data In May 2013, Stage 1 was completed and as per the deal, Chevron has now an option to proceed to Stage 2. If for any reason, Chevron decides not to proceed to Stage 2 of the deal then the interests held by Chevron will be restored to BPT without any consideration. Chevron has another option after completion of Stage 2 whereby if it chooses not to proceed then BPT may elect to receive a re-assignment of the interests held by Chevron.

Beach Energy (BPT.AX / BPT AU) 27 30 May 2013

We view this farm-out transaction to Chevron as a strong positive for BPT as Chevron has strong technical experience in developing unconventional shale gas resources and has the financial strength to fund the development of the acreage through to production if deemed commercial. SACB JV SACB JV (20.21%) has ~7,100 sq km of unconventional acreage and is where the Momba-191 unconventional vertical gas well was spudded in August 2012. After flowing at an initial flowrate over 3 MMscf/d the well was quickly tied back and connected to the Moomba gas facility on 28 September Moomba-191 flowed at average ~2.7 MMscfd for the first month and is now flowing at ~2 MMscfd. Capex for the well is estimated at $15mn which we estimate to be uneconomic at current gas prices of A$4.5/GJ. We estimate a breakeven (NPV = 0) gas price of A$15/GJ is required. Nevertheless, Moomba-191 is a pilot well and provides important flowrate data to help further assess the commerciality of the REM Shale. Santos has indicated that around six wells (three vertical and three horizontal) will be drilled in the SACB JV during 2013-14.

Figure 38: SACB unconventional drilling and fracture stimulation schedule

Source: Santos presentation

Beach Energy (BPT.AX / BPT AU) 28 30 May 2013

International assets We have discussed BPT’s Australian operations and below we review the company’s activities in Egypt and Tanzania as these two countries contain the most significance for future growth, in our view. Egypt BPT holds a 20% interest in the North Shadwan concession (BP 50% Operator), in the Gulf of Suez which to date has produced around 10 billion barrels of oil. The company also holds a 22% interest in the Abu Sennan concession (Kuwait Energy 50% Operator) within the prolific Abu Gharadig Basin of the Western Desert, and a 15% interest in the Mesaha Area concession (Melrose 40% Operator), located onshore southwest Egypt.

Figure 39: Egypt concession location map

Source: Company presentation North Shadwan (20%) BPT achieved first oil production from the NS 377 well in March 2012. In 3Q13, the two North Shadwan wells (NS 377 and NS 385) produced 310 bpd (net to BPT), around half of which was trucked to the Ras Budran facility. Abu Sennan (22%) Abu Sennan produced 150 bopd (net) in 2Q13 with volumes improving due to extended production testing. Kuwait Energy (Operator) is currently drilling three E&A wells and undertaking extended production tests on existing discoveries to increase oil production and add further 2P reserves. Mesaha (15%) During the 3Q13, Melrose (Operator) drilled the first exploration well (Mesaha-1X ST1) on Mesaha which failed to encounter any hydrocarbon indicators and was plugged and abandoned. Melrose and BPT will use the sub-surface samples to review the regional geology and the local prospectivity of the Mesaha Graben.

Beach Energy (BPT.AX / BPT AU) 29 30 May 2013

Figure 40: North Shadwan concession Figure 41: Abu Sennan concession

Source: Company data Source: Company data Tanzania BPT holds a 100% interest in the Lake Tanganyika South Block in the prospective East African Rift System. The company successfully bid for the Lake Tanganyika South Block licence in the 2008 bid round and signed the Production Sharing Agreement (PSA) with the Tanzanian Petroleum Development Company (TPDC) in 2010. Total S.A. holds the licence for Lake Tanganyika North Block although is still negotiating the PSA. The Lake Tanganyika South Block covers a 5,500 sq km area over the southern portion of Lake Tanganyika which is 600km in length and 40-80km wide, straddling the border between Tanzania, D.C. Congo and Zambia. The East African Rift System was formed during the Miocene to recent rifting of central Africa. Exploration of rift systems globally have resulted in many prolific discoveries and it is generally accepted that rift valley settings support the development of source, reservoir, seal and trap formations. Natural oil seeps underneath Lake Tanganyika indicate a working petroleum system while further to the north in Lake Albert, Uganda, Tullow Oil has discovered over 1.2 billion boe (P50). Following the discovery, Total SA and CNOOC both acquired a 33.33% interest in Tullow’s Lake Albert blocks for a total US$2.9bn.

Beach Energy (BPT.AX / BPT AU) 30 30 May 2013

Figure 42: Lake Tanganyika South Block location map

Source: Company presentation During 2012, BPT acquired 2,080km of 2D seismic data over the block which was processed in February 2013. The seismic data is currently being interpreted and according to management comments during the 3Q13 conference call, ‘the data appears promising’. BPT intends to identify several prospects and leads by mid-2013 for exploration drilling while assessing farm-out options with potential equity partners to reduce BPT’s share of drilling capex. We expect BPT to farm down up to 60% of its interest in the block and obtain a free carry. Given the 1.2bn boe discovered in Lake Albert (Uganda), also part of the East African Rift System, we would not be surprised if BPT identifies several 200 mmboe oil prospects to be drilled at Lake Tanganyika in the coming year. However, we note that Lake Tanganyika is landlocked and that Tanzania lacks upstream infrastructure. The cost of developing an oil field and transporting the crude 1,000km to the coast at Dar Es Salaam could cost US$4-6bn based on capex for Tullow’s project in Uganda. Clearly BPT will need to farm down to a major IOC to help fund drilling and development of any significant discoveries.

Beach Energy (BPT.AX / BPT AU) 31 30 May 2013

Figure 43: 2,100km of 2D seismic has been acquired Figure 44: Potential targets, red = gas, green = oil

Source: Company presentation Source: Company presentation

Beach Energy (BPT.AX / BPT AU) 32 30 May 2013

Eastern Australian Gas Prices The Australian east coast gas market is expected to experience a dramatic change in the coming years due to the ramp up of three LNG projects (GLNG, APLNG, QCLNG) in Gladstone around 2015. As outlined below, we forecast east coast gas consumption to triple to 2,200 PJ p.a. leading to a projected doubling of domestic east coast gas prices to A$8-10/GJ post 2015, up from ~A$3-4/GJ currently.

■ LNG a game changer: By 2015, all three Gladstone LNG projects have begun ramping up towards a combined capacity of 25mtpa. Gas requirements in EA will more than triple from 700PJa to above 2,200PJa in three to five years. Facing a steep ramp up profile, the LNG JVs will be a net drag on the domestic market. With long-term contracts mostly rolling off from 2016, there is limited visibility on future supply and demand balances.

■ We believe an additional 50PJa will need to be developed by 2016, and much more in the years after that. To meet the increased demand, new coal seam gas (CSG) fields will need to be approved and existing conventional fields must ramp up. Some demand destruction may also have to occur with electricity generation likely to partially switch back to coal.

■ Prices up to A$10/GJ: We believe domestic gas prices will quickly move to LNG netback pricing. We expect prices to fluctuate in a range of $8-10/GJ (from $3-4/GJ currently), depending on Brent oil price and AUD/USD movements. If approval processes for CSG fields drag on, prices may go higher in the short term.

■ Winners are BPT, BHP and ORG: We assume the Gippsland and Cooper Basins will be called on to meet additional demand, with BHP and BPT the key benefactors. STO also benefits, but is tied down with GLNG, trying to secure ramp gas in the short term and reserves in the long term. Among the generators, ORG is better placed than AGL given ownership of quality CSG fields and a long-term contract book.

■ Risk to our thesis include a flood of new CSG approvals, weak international LNG pricing, new gas discoveries or shale developments, gas reservation policies or switching to alternative power sources.

Figure 45: Supply shortage looming 750

700

650

600

550 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total base case production Ironbark Gloucester Camden North Narrabri Domestic Demand Source: Wood Mackenzie, Core Energy, Credit Suisse

Beach Energy (BPT.AX / BPT AU) 33 30 May 2013

Contracted gas sales BPT’s gas production is sold under long-term supply contracts (Gas Sales Agreements) to customers such as AGL and Origin Energy at approximately A$4.0/GJ. The company’s legacy gas supply agreements are due to expire post CY16 at which point BPT is well positioned to benefit from the projected doubling of east coast gas prices to ~A$8.0/GJ. Unlike STO and AGL, BPT has no interests in downstream LNG projects and will therefore receive the full earnings uplift from higher gas prices. In April 2013, BPT signed a GSA with Origin Energy for up to 139 PJ over eight years starting in FY15 with the potential for a two year extension to 173 PJ. The supply of ~17.4 PJ pa of gas will be sourced from BPT’s interests in the SACB JV (20.21%), SWQ JV (23.2%) and the Patchawarra East JV (17%). BPT has indicated pricing will be based on an oil linked curve and other parameters. Based on our FY15 Brent crude oil forecast of US$104/bbl, gas sold using an oil-linked formula could be sold for ~A$7-8/GJ. We estimate that in FY16, BPT will also have ~8.5 PJ of uncontracted gas production available to be sold at our forecast higher price of ~A$8.0/GJ.

Figure 46: BPT to benefit from higher east coast gas prices as contracts expire

Source: Company presentation

Beach Energy (BPT.AX / BPT AU) 34 30 May 2013

Board and management Glenn Stuart, Independent Non-Executive Chairman Mr Davis joined BPT in 2007 as a non-executive director and was appointed non- executive Deputy Chairman in 2009. Mr Davis is a solicitor and brings his expertise and experience in the execution of large legal and commercial transactions to the Board. Mr Davis is a director of ASX listed Monax Mining Limited (since 2004) and Marmota Energy Limited (since 2006). Reginald Nelson, Managing Director Mr Nelson has a solid background in the oil & gas industry with over 40 years’ experience as an exploration geophysicist. Mr Nelson joined BPT as an executive director in 1992, before being appointed Chief Executive Officer in 1995 then Managing Director in 2002. Between 2004 and 2006, Mr Nelson also held the position of chairman of the Australian Petroleum Production and Exploration Association (APPEA). He is also a Director of ASX listed Ramelius Resources Limited (since 1995), Monax Mining Ltd (since 2004) and Marmota Energy Limited (since 2006). Kathryn Presser, Chief Financial Officer Ms Presser has over 25 years' experience in senior accounting and company secretarial roles and is a qualified chartered secretary. Ms Presser joined BPT in 1997, was appointed as the Company Secretary in 1998 then as the Chief Financial Officer in 2005. Ms Presser is currently on the Committee of the South Australian Branch of Chartered Secretaries Australia, a member of the Petroleum Society of Australia and a Director of Mawson Petroleum Pty Ltd. Neil Gibbins, Chief Operating Officer Mr Gibbins is a geophysicist with over 25 years of experience in the petroleum industry. Mr Gibbins joined BPT in 1997 as a Chief Geophysicist and was appointed Exploration Manager in 2005. Prior to joining BPT, he was employed by Esso Australia and Santos Limited. Mr Gibbins is a member of the Petroleum Exploration Society of Australia and the Australian Society of Exploration Geophysicists. Steve Masters, Chief Commercial Officer Mr Masters joined BPT in 2007 after working for Woodside for nearly a decade where he held a variety of commercial roles relating to LNG, domestic gas, and offshore oil projects, corporate development and mergers and acquisitions. Mr Masters holds a Bachelor of Applied Science (Applied Geology) from the Royal Melbourne Institute of Technology a Bachelor of Science (Hons) in Petroleum Geology and Geophysics from the University of Adelaide. Gordon Moseby, General Manager (Business Review and Planning) Mr Moseby joined BPT in 2002 to manage the operation and development of BPT’s oil and gas assets. In 2009 Mr Moseby was promoted to General Manager – Business Review and Planning to focus on BPT’s Corporate Planning and Business Development. Mr Moseby is a member of the Society of Petroleum Engineers (SPE), the Petroleum Exploration Society of Australia (PESA) and the Australian Institute of Company Directors (AICD). Mr Moseby holds a Bachelor of Petroleum Engineering from the University of New South Wales.

Beach Energy (BPT.AX / BPT AU) 35 30 May 2013

Shareholder structure BPT is traded on the Australian Stock Exchange with a current market capitalisation of $1.47 billion placing the stock in the S&P/ASX 100 Index. The company has a significant free float of 88% and low short interest of 1.42%. Below we list the top ten largest shareholders and a breakdown of ownership by geographical region.

Figure 47: Top ten shareholders (29 May 2013) Figure 48: Geographical breakdown by shareholder Ellerston Capital 7.46% Other Bank of America 5.09% Norway 3% 8% UBS 5.05% National Australia Bank 5.05% Switzerland Australia 21% AMP 4.99% 40% Credit Suisse 4.90% Norges Bank 4.03% T Rowe Price 2.82% Dimensional Fund Advisory 2.51% United States Fidelity (FMR LLC) 1.29% 28%

Source: Bloomberg Source: Bloomberg

Beach Energy (BPT.AX / BPT AU) 36 30 May 2013

Australian energy sector comps

Figure 49: Credit Suisse Australian energy comps Ticker Rating FX Price Target Market EV EPS P/E Australian E&P Price Capital 30-May A$Mn 11A 12A 13E 14E 15E 12A 13E 14E 15E Energy Woodside Petroleum WPL.AX N AUD 36.30 38.50 29,908 31,768 2.45 2.27 2.95 2.66 14.8 16.0 12.3 13.7 Origin Energy ORG.AX N AUD 13.47 12.20 14,789 18,064 0.82 0.69 0.73 0.88 16.4 19.6 18.4 15.3 Santos Ltd STO.AX N AUD 12.94 14.00 12,478 14,031 0.53 0.55 0.55 0.77 24.4 23.7 23.6 16.9 Oil Search OSH.AX O AUD 8.35 8.60 11,189 13,486 0.11 0.13 0.25 0.63 74.7 62.7 33.6 13.4 Beach Energy BPT.AX O AUD 1.16 1.60 1,471 1,206 0.14 0.10 0.12 0.13 8.3 11.2 9.5 9.1 Aurora Oil & Gas AUT.AX O AUD 3.08 4.00 1,379 1,691 0.13 0.28 0.60 0.56 24.6 10.9 5.1 5.5 Karoon Gas KAR.AX O AUD 5.55 8.15 1,229 1,001 (0.01) (0.31) (0.13) (0.06) nm nm nm nm AWE Ltd AWE.AX AUD 1.33 692 662 0.11 0.06 0.07 0.09 12.2 22.2 20.4 14.3 Total / Median / Average 73,135 16.4 19.6 18.4 13.7 2,012 2,013 2,014 2,015 2013 2014 Ticker EV Reserves EV/2P EBITDAX EV/EBITDAX Australian E&P Reserves 1P 2P 3P 12A 13E 14E 15E 12A 13E 14E 15E Energy Woodside Petroleum WPL.AX 31,768 1231 1544 na 20.6 4513 4349 5479 5345 7.0 7.3 5.8 5.9 Origin Energy ORG.AX 18,064 1118 16.2 2257 2202 2408 2722 8.0 8.2 7.5 6.6 Santos Ltd STO.AX 14,031 663 1406 na 10.0 1593 1747 1985 2564 8.8 8.0 7.1 5.5 Oil Search OSH.AX 13,486 338 552 na 24.4 508 519 773 2024 26.6 26.0 17.4 6.7 Aurora Oil & Gas AUT.AX 1,691 70 76 91 22.3 160 364 619 656 10.5 4.7 2.7 2.6 Karoon Gas KAR.AX 1,001 0 0 0 (19) (22) (27) (27) (53.6) (45.5) (37.1) (37.1) Beach Energy BPT.AX 1,206 0 93 13.0 303 309 352 361 4.0 3.9 3.4 3.3 AWE Ltd AWE.AX 662 33 60 na 11.0 181 162 166 207 3.7 4.1 4.0 3.2 Total / Median / Average 7.5 6.0 4.9 4.4 Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 37 30 May 2013

Environment, Social and Governance Environment issues

■ BPT has a stated commitment to conducting its operations in an environmentally responsible manner and to comply with all relevant environmental management plans for its activities as required by the appropriate Regulating Authority. The company also involves various external independent third party reviewers and auditors from time to time to audit the operations at various sites to confirm that it is complying with the conditions of various stakeholders.

■ However, BPT is involved in hydraulic fracturing, also known as fraccing which uses millions of litres of water mixed with sand and chemical additives that are then pumped under high pressure into shale formations 3,000 to 5,00 meters below the surface. Shale fractures that result from the pressure are retained by the sand and allow the gas to flow and rise up through the wellbore. Potential hazards include accidents due to transportation of toxic chemicals; emissions from natural gas flares; concentrated toxic and radioactive wastewater stored on site; and potential discharge/leak of such wastewater before adequate treatment.

■ We believe the risk of fracture stimulation in the Cooper Basin is mitigated by the depth of ~4,000 metres, well below the water table and that the wells are sealed and cemented to prevent any contamination. We acknowledge that fraccing remains highly controversial and we will continue to monitor the potential impacts closely. Social issues

■ BPT is committed to the health and safety of employees, contractors and the public through sound management practices. The group’s Health and Safety Policy is available on the company’s website for public review. BPT is now in its second year of the three year plan, with improvement evident from its strategic approach. Independent audits have verified that Beach has exceeded its annual improvement target with regard to improvements in the HSE system.

■ At the 2012 AGM in November 2012, BPT stated that it has had two recordable injuries among BPT employees over the last three years and that it is working to educate increasing numbers of contractors in the BPT safety culture.

■ BPT is also responsible for making many social investments by not only sponsoring and supporting various organisations focused on flora and fauna and fossil conservation but also by sponsoring various arts and sports organisations. Governance issues

■ The Board largely consists of independent directors and has formed committees like Corporate Governance Committee, Audit Committee, Remuneration and Nomination Committee, and Corporate Development Committee for smooth and proper functioning of the company. The company has a proper Corporate Governance Statement highlighting the policies, procedures, systems, and corporate governance principles and practices followed in the company and also the extent to which it complies with the Corporate Governance Principles and Recommendations (Principles) released by the ASX Corporate Governance Council. Recently, no material governance issue has been faced by the Company. Remuneration

■ We believe that the remuneration framework followed by BPT is appropriate and very much in line with the company’s key objective of maximising shareholders’ wealth.

Beach Energy (BPT.AX / BPT AU) 38 30 May 2013

■ The three broad divisions of the remuneration for the senior executives can be divided into fixed remuneration, short term ‘at risk’ incentive and long term ‘at risk’ incentive. An internal Board, Remuneration and Nomination Committee, as well as an external remuneration consultant are appointed in order to decide the remuneration of senior executives and to continuously review the same.

■ The fixed remuneration of the senior executives were lowered from 56-75% in FY2011 to 47-67% in FY2012 while ‘at risk’ remuneration increased from 25-44% in FY2011 to 33-53% in FY2012. o In FY12 Managing Director Reg Nelson received total remuneration of $2,881,304 including a base salary of $1,296,940. o Short-term incentive (STI): Cash and/or equity based incentive linked to company and individual performance. The key performance indicators (KPIs) for STIs are net profit after tax, increase in oil and gas reserves and level of production for the relevant financial year. These KPIs have a weighting of 75% of the STI while the rest of 25% weighting is based on the position and the role to which the executive belongs. The MD of the company can earn an STI in the range of 25% to 100% of his fixed remuneration while other senior executives can earn from 10% to 80% of their fixed remuneration o Long-term incentive (LTI): Equity Grants granted annually linked to the performance conditions measured over an extended period. LTI is linked to the Total Shareholder Return (TSR) where TSR of Beach is benchmarked against a comparator group of Australian oil and gas exploration and development companies and other companies in the S&P/ASX 300 Energy list. As per the 2011 Performance Rights granted in Dec 2011, the limit for MD was set at 100% of the TFR and 60-80% of TFR for other senior executives while the actual vesting depended on the Beach’s TSR in comparison to its peer group. If Beach’s TSR was ranked <50th percentile, 0% vesting was allowed; equal to 50% percentile lead to 50% vesting; >50th percentile and <75th percentile meant a prorated number will be allowed to vest and >75th percentile allowed 100% vesting. While this type of Relative TSR performance hurdle is quite common, we would prefer to see 0% vesting at the 50th percentile and 100% vesting at the 100th percentile, thus truly rewarding top quartile performance. Board

■ A brief analysis of the Board’s skill and attributes is given below in Figure 50.

■ The Board consists of six Independent Directors and Reg Nelson as the Managing Director of the company. BPT is fortunate enough to have people with diverse backgrounds and to have at least an expert in all the financial, legal, industry and commercial fields. Some of the members also bring with them experience of being on the boards of other ASX companies and addressing the business challenges.

■ It is pleasing to see two female Independent non-executive directors on the Board of the company: Belinda Robinson and Fiona Rosalyn Vivienne Bennett.

■ However, we note that John Charles Butler has been an Independent non-executive director since June 1999; he is no longer considered Independent.

Beach Energy (BPT.AX / BPT AU) 39 30 May 2013

Figure 50: Board skills analysis ASX Board Remuneration Name Position Tenure Financial Legal Industry Commercial Experience Independent ($k) Glenn Stuart Davis Non-Executive Chairman 6 Yes Yes Yes Yes 144 Reginald George Nelson Managing Director 21 Yes Yes 2881 John Charles Butler Non-Executive Director 14 Yes Yes 120 Franco Giacomo Moretti Non-Executive Director 8 Yes 108 Belinda Robinson Non-Executive Director 2 Yes 97 Fiona Rosalyn Vivienne Bennett Non-Executive Director Yes Yes NA Douglas Arthur Schwebel Non-Executive Director Yes Yes NA Source: Company data, Credit Suisse estimates Valuation impact

■ BPT has environmental issues relating to the use of hydraulic fracturing: BPT uses fracture stimulation technology to help fracture the shale rock and improve flowrates. Fraccing operations may lead to its exposure towards various potential hazards and accidents such as leakage of the waste water stored on the site and transportation and emission of toxic chemicals. We assume a 5% valuation impact to incorporate the risk and issues related to the environment from fraccing. MSCI rating

■ MSCI rates Beach Energy a ‘BBB’ rating on its ESG rating system. This compares to Santos rated ‘A’, AWE rated ‘BBB’ and Oil Search rated ‘BB’.

■ BPT scored particularly high in the health and safety issues putting the company in the top quartile relative to its peers on this issue. However, an area of concern for BPT has been the issue relating to carbon emissions. MSCI has raised issues with respect to the weak management of carbon emissions by the company and high exposure to carbon regulations from its operations, thus ranking BPT in the third quartile on this issue.

Figure 51: MSCI IVA rating for BPT 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Environment Social Governance

Stock Local Sector Country Global Sector

Source: MSCI IVA Rating

Beach Energy (BPT.AX / BPT AU) 40 30 May 2013

Figure 52: BPT—summary model Commodity price assumptions Units FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F AUD:USD $ 0.75 0.88 0.99 1.03 1.03 0.98 0.95 0.93 0.91 Oil - WTI bbl 69.6 75.2 89.5 94.5 94.1 106.5 98.3 97.0 97.0 Oil - Brent bbl 83.9 85.3 100.9 106.2 109.4 110.0 103.8 97.5 95.0 Gas - Henry Hub MMBtu 5.95 4.54 4.89 3.17 3.34 3.85 4.15 4.43 4.70 Gas - Eastern Australia PJ 3.61 3.75 3.90 4.06 4.46 4.75 5.06 5.79 6.73 LPG Price US$/t 0 340 643 860 949 968 987 1,007 1,012

Production by area FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Cooper and Eromanga Basins mmboe 9.6 7.0 6.5 7.5 7.9 9.1 9.2 8.5 7.6 Egypt mmboe 0.0 0.3 0.1 0.0 0.2 0.3 0.5 0.7 0.5 Total mmboe 9.6 7.3 6.6 7.5 8.1 9.4 9.7 9.3 8.1

Production by type FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Sales Gas & Ethane mmboe 5.4 4.0 3.8 4.0 3.8 4.9 5.3 5.0 4.4 Crude oil mmboe 3.3 2.6 2.1 2.8 3.5 3.6 3.5 3.4 2.9 Condensate mmboe 0.4 0.3 0.3 0.3 0.4 0.6 0.5 0.5 0.5 LPG mmboe 0.4 0.4 0.4 0.4 0.3 0.3 0.4 0.3 0.3 Total (mmboe) mmboe 9.6 7.3 6.6 7.5 8.1 9.4 9.7 9.3 8.1

Consolidated P&L FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Gas and Gas Liquids A$m 208.9 195.9 196.2 196.3 201.7 241.7 262.1 270.1 268.9 Crude oil A$m 309.9 215.1 220.5 314.3 385.3 402.1 382.8 356.1 296.1 Third party product sales A$m 62.5 76.5 79.7 108.0 100.8 106.4 106.4 106.4 106.4 Total product sales A$m 581.4 487.5 496.4 618.6 687.8 750.2 751.3 732.6 671.4 Other revenue A$m 2.2 1.7 1.8 0.7 3.7 3.7 3.7 3.7 3.7 Other income A$m 395.4 58.7 26.0 45.3 10.0 20.0 20.0 20.0 20.0 Total revenue A$m 978.9 547.9 524.3 664.6 701.4 773.8 775.0 756.3 695.1 Total cash cost of production A$m 232.3 221.8 215.5 205.6 207.0 200.6 212.7 202.3 180.3 Third party product purchases A$m 64.5 72.7 79.7 104.3 101.3 101.3 101.3 101.3 101.3 (Increase)/decrease in product stock A$m -5.9 6.0 22.1 2.5 2.0 0.0 0.0 0.0 0.0 Other expenses A$m 179.6 98.6 229.0 48.8 82.5 119.7 99.7 99.7 99.7 Total expenses A$m 470.4 399.1 546.4 361.3 392.8 421.6 413.7 403.3 381.3 EBITDA - underlying A$m 508.5 148.8 -22.1 303.3 308.6 352.3 361.2 352.9 313.7 Depreciation and depletion A$m 169.4 114.2 101.7 108.7 123.3 142.4 135.7 134.8 117.0 EBIT - underlying A$m 339.1 34.6 -123.8 194.6 185.3 209.9 225.5 218.1 196.7 Profit before tax A$m 321.6 34.4 -121.3 187.8 187.3 219.4 230.0 221.3 207.6 Income tax expense A$m -61.2 -1.3 23.8 -23.6 -57.6 -65.8 -69.0 -66.4 -62.3 Royalty-related taxation expense A$m -59.7 -54.2 -65.8 -37.0 -31.1 0.0 0.0 0.0 0.0 OEI A$m 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Reported NPAT A$m 260.4 33.4 -96.8 165.1 129.7 153.6 161.0 154.9 145.3 Significant items A$m -199.1 7.7 139.5 -42.2 17.2 0.0 0.0 0.0 0.0 NPAT underlying A$m 61.3 41.1 42.7 122.9 146.9 153.6 161.0 154.9 145.3 Normalised cash NPAT A$m 429.8 147.6 4.9 273.8 253.0 295.9 296.7 289.7 262.4

Key financials FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Reported EPS (diluted) cps 25.2 3.1 -8.8 14.1 10.3 12.2 12.7 12.2 11.4 Underlying EPS (diluted) cps 5.9 3.8 3.9 10.5 11.7 12.2 12.7 12.2 11.4 Cash EPS (diluted) cps 22.3 14.5 13.1 19.8 11.7 23.5 23.0 21.8 19.1 EPS growth % 0% -35% 1% 176% 9% 4% 4% -4% -7% Diluted average shares m 1,033 1,071 1,098 1,168 1,258 1,263 1,268 1,273 1,278 PER x 19.5x 30.2x 29.8x 11.0x 9.9x 9.5x 9.1x 9.5x 10.2x PER (cash) x 5.2x 8.0x 8.8x 5.8x 9.9x 4.9x 5.1x 5.3x 6.1x DPS cps 2.25 2.25 2.25 2.25 2.25 2.25 2.25 2.25 2.25 Payout ratio % 38% 59% 58% 21% 19% 19% 18% 18% 20% Dividend yield (net) % 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% Franking % 100% 100% 100% 100% 100% 100% 100% 100% 100% Dividend yield (gross) % 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 41 30 May 2013

Figure 53: BPT—summary model (continued) Key operational financials FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F EBITDA margin % 87.5% 30.5% -4.5% 49.0% 44.9% 47.0% 48.1% 48.2% 46.7% EBIT margin % 58.3% 7.1% -24.9% 31.5% 26.9% 28.0% 30.0% 29.8% 29.3% NPAT margin % 10.5% 8.4% 8.6% 19.9% 21.4% 20.5% 21.4% 21.1% 21.6% Tax rate % 37.6% 161.3% -34.7% 32.3% 47.4% 30.0% 30.0% 30.0% 30.0% EBITDA growth % 0.0% -70.7% -114.9% nm 1.8% 14.1% 2.5% -2.3% -11.1% EBIT growth % 0.0% -89.8% -457.9% -257.2% -4.8% 13.3% 7.4% -3.3% -9.8% NPAT growth % 0.0% -32.9% 3.9% 187.8% 19.5% 4.6% 4.8% -3.8% -6.2%

Gearing FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Net Debt A$m -136.2 -169.9 -173.3 -265.1 -175.5 -58.0 -15.1 -172.8 -326.8 Net Debt / Equity % -10.2% -12.4% -13.6% -16.4% -10.2% -3.1% -0.8% -8.2% -14.7% Net Debt / (Equity+Net Debt) % -11.4% -14.1% -15.8% -19.7% -11.3% -3.2% -0.8% -8.9% -17.2% Interest cover (x) (EBITDA) x -29.0x -791.4x -8.6x -44.5x 159.5x 37.0x 79.9x 110.2x 28.6x Interest cover (x) (EBIT) x -19.4x -184.0x -48.3x -28.5x 95.8x 22.1x 49.8x 68.1x 17.9x

Cashflows FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Operating cashflows A$m 173.3 128.5 184.5 218.2 290.3 307.7 297.9 299.4 280.0 Capex A$m 461.7 147.1 153.7 256.6 451.3 396.0 311.4 112.3 96.3 Free cash flow A$m -288.5 -18.6 30.9 -38.4 -161.0 -88.3 -13.5 187.1 183.7 Other investing cashflows A$m 294.3 60.9 -17.8 -81.1 92.9 -0.6 -0.6 -0.6 -0.6 Financing cashflows A$m -251.2 -6.8 -6.8 324.2 56.6 -28.6 -28.7 -28.9 -179.0 Net increase in cash A$m -245.3 35.5 6.3 204.7 -11.6 -117.5 -42.8 157.6 4.1 Cash at end of the year A$m 136.2 169.9 173.3 378.5 367.1 249.6 206.7 364.4 368.4

Balance Sheet FY09 FY10 FY11 FY12 FY13F FY14F FY15F FY16F FY17F Cash A$m 136.2 169.9 173.3 378.5 367.1 249.6 206.7 364.4 368.4 Receivables A$m 74.2 116.1 54.4 114.9 110.3 118.1 118.0 115.0 103.9 Inventories A$m 101.2 90.9 66.7 64.4 48.8 59.0 62.6 57.7 50.5 Derivative financial Instruments A$m 11.5 2.6 0.3 0.5 0.2 0.2 0.2 0.2 0.2 Exploration and evaluation expenditure A$m 296.3 269.2 364.7 553.6 653.7 803.2 910.4 918.1 922.8 Property, plant and equipment A$m 365.1 367.2 318.5 336.8 385.5 426.8 470.1 513.6 552.5 Petroleum assets A$m 584.1 573.9 535.7 599.1 705.3 761.6 780.3 700.1 629.3 Deferred tax assets A$m 67.4 63.9 54.4 67.0 78.2 78.2 78.2 78.2 78.2 Other assets A$m 68.7 23.4 19.8 33.5 38.9 38.9 38.9 38.9 38.9 Assets A$m 1,704.8 1,677.0 1,587.8 2,148.2 2,387.9 2,535.6 2,665.4 2,786.2 2,744.8 ------Payables A$m 113.6 93.9 122.1 121.0 110.4 133.1 130.6 125.3 117.6 Provisions A$m 71.4 79.1 85.2 111.1 118.0 118.0 118.0 118.0 118.0 Tax liabilities A$m 54.3 5.6 0.3 0.3 0.1 0.1 0.1 0.1 0.1 Borrowings A$m - - - 113.4 191.6 191.6 191.6 191.6 41.6 Other liabilities A$m 132.7 126.9 107.7 190.5 243.6 243.6 243.6 243.6 243.6 Liabilities A$m 372.1 305.5 315.3 536.3 663.6 686.3 683.8 678.5 520.8 ------Net Assets A$m 1,332.7 1,371.6 1,272.5 1,611.8 1,724.4 1,849.3 1,981.6 2,107.6 2,224.0 Net Tangible Assets A$m 1,332.7 1,371.6 1,272.5 1,611.8 1,724.4 1,849.3 1,981.6 2,107.6 2,224.0 A$m Period end shares m 1,036.5 1,092.4 1,103.1 1,255.5 1,260.5 1,265.5 1,270.5 1,275.5 1,280.5 NAV per share A$ 1.3 1.3 1.2 1.4 1.4 1.5 1.6 1.7 1.7 ROE % 20% 2% -7% 11% 8% 9% 8% 8% 7% P / BV x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x NTA per share A$ 1.3 1.3 1.2 1.4 1.4 1.5 1.6 1.7 1.7 ROTE % 20% 2% -7% 11% 8% 9% 8% 8% 7% P / NTA x 0.9x 0.9x 1.0x 0.8x 0.8x 0.8x 0.7x 0.7x 0.7x ROIC % 15% -1% -13% 7% 5% 7% 7% 6% 6%

Source: Company data, Credit Suisse estimates

Beach Energy (BPT.AX / BPT AU) 42 30 May 2013

PEERS overview

Figure 54: PEERS overview

Source: Company data, Credit Suisse estimates

The author of this report wishes to acknowledge the contribution made by Aashish Daluka, an employee of CRISIL Global Research and Analytics, a business division of CRISIL Limited, a third-party provider of offshore research services to Credit Suisse.

Beach Energy (BPT.AX / BPT AU) 43 30 May 2013

Reference Appendix Our new “Total return forecast in perspective” chart helps visualize Credit Suisse and consensus views of a company’s 12-month return within the context of forecasting risks and its historical trading pattern: 12mth Volatility is calculated as the annualised standard deviation of weekly total return series over the past 12 months. It illustrates variability of stock returns; in other words, risk. The way to think about it is that one would rather take 10% forecast return from a stock that has 20% volatility, than from the stock that has 40% volatility. The shaded area shows the one standard deviation range based on past 12 months volatility. In statistical terms, once you make a number of brave assumptions, there is a 68% probability that the share price will end up inside that range in 12 months time. 52wk Hi-Lo is maximum and minimum daily closing price over the past 52 weeks. It is often handy to know the price momentum especially when the stock is trading close to its highs and lows: Is the stock trading close to its peak? Is the momentum against the stock? *Consensus is IBES consensus supplied by Thomson Reuters. IBES is a survey of sell side research analysts, collecting a few dozen data points such as EPS, DPS, Sales, Target Price, ROE and so on. *Mean is the average of target returns, while the shaded area around the mean represents the range of estimates from the lowest to the highest estimate. This aids visualisation of a number of important factors such as: the range of analyst estimates; where Credit Suisse’s estimates on this stock sit relative to consensus; and where the share price is relative to consensus mean and consensus range target. Target return is calculated as capital gain plus forecast dividend yield (net) over the next 12 months. For “CS tgt” we have used Credit Suisse’s target price and Credit Suisse forecast for 12-month forward dividend, grossed up for franking. For the consensus mean and range, we have used consensus target price and consensus dividend forecasts for 12 month forward.

Beach Energy (BPT.AX / BPT AU) 44 30 May 2013

Companies Mentioned (Price as of 30-May-2013) AGL Energy (AGK.AX, A$14.13) AWE Ltd (AWE.AX, A$1.32) Aurora Oil & Gas (AUT.AX, A$3.08) BHP Billiton (BHP.AX, A$34.46) Beach Energy (BPT.AX, A$1.16, OUTPERFORM, TP A$1.6) CNOOC Ltd (0883.HK, HK$13.76) Chevron Corp. (CVX.N, $125.49) Drillsearch (DLS.AX, A$1.105) Karoon Gas (KAR.AX, A$5.55) Oil Search (OSH.AX, A$8.35) Origin Energy (ORG.AX, A$13.47) Santos Ltd (STO.AX, A$12.94) Senex Energy Limited (SXY.AX, A$0.57) Total (TOTF.PA, €39.4) Woodside Petroleum (WPL.AX, A$36.3)

Disclosure Appendix Important Global Disclosures I, James Redfern, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Beach Energy (BPT.AX / BPT AU) 45 30 May 2013

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 42% (53% banking clients) Neutral/Hold* 39% (48% banking clients) Underperform/Sell* 15% (38% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for Beach Energy (BPT.AX) Method: Our $1.60/sh target price is set broadly in line with our risked valuation of $1.58/sh. Our valuation is derived using a risked sum-of-the- parts DCF valuation for BPT's producing assets (11% WACC), adjusted for net cash, plus risked exploration upside relating to unconventional shale gas in the Copper Basin and exploration in Tanzania. In valuing BPT's exploration upside, we use a resource multiple risked for the probability of success. Our long-term commodity price assumption includes $8/GJ gas and $90/bbl oil. Risk: Risks to our $1.60/sh target price includes lower-than-forecast oil and gas prices, a higher AUD/USD exchange rate, geological risks e.g. uncommercial discoveries, the failure of unconventional shale gas to be economic/commercial, funding risks, changes to royalties and the Petroleum Resource Rent Tax regime.

Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names The subject company (STO.AX, ORG.AX, WPL.AX, OSH.AX, KAR.AX, AUT.AX, AWE.AX, CVX.N, 0883.HK, BHP.AX, TOTF.PA) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (WPL.AX, AUT.AX, 0883.HK, TOTF.PA) within the past 12 months. Credit Suisse provided non-investment banking services to the subject company (ORG.AX, WPL.AX, AUT.AX, BHP.AX) within the past 12 months Credit Suisse has managed or co-managed a public offering of securities for the subject company (AUT.AX, 0883.HK) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (WPL.AX, AUT.AX, 0883.HK, TOTF.PA) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (BPT.AX, STO.AX, ORG.AX, SXY.AX, WPL.AX, OSH.AX, KAR.AX, AUT.AX, AWE.AX, CVX.N, 0883.HK, BHP.AX, TOTF.PA) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (ORG.AX, WPL.AX, AUT.AX, BHP.AX) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (CVX.N). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (BPT.AX). Credit Suisse has a material conflict of interest with the subject company (0883.HK). Credit Suisse is acting as financial advisor to both CNOOC Ltd. and SINOPEC on the acquisition of Marathon Oil Corporation's 20% interest in Block 32, offshore Angola. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (BPT.AX, STO.AX, AGK.AX, ORG.AX, SXY.AX, WPL.AX, OSH.AX, KAR.AX, AUT.AX, AWE.AX, CVX.N, 0883.HK, BHP.AX, TOTF.PA) within the past 12 months

Beach Energy (BPT.AX / BPT AU) 46 30 May 2013

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Beach Energy (BPT.AX / BPT AU) 47 30 May 2013

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