Beach Energy is adjusting its investment strategy in response to the Australian federal government’s proposed domestic gas reservation scheme, which requires liquefied natural gas (LNG) exporters to reserve 20 percent of exportable gas for the domestic market. The company’s chief executive, Brett Woods, indicated that the policy is influencing decisions about capital expenditure and gas marketing, prompting Beach to explore new markets beyond traditional domestic customers.

Following the announcement of the gas reservation proposal by the Labor government, Beach has already sold an offshore Victorian asset and revised its capital spending plans. Woods explained that the company modified its investment approach to focus only on projects that remain viable under the new policy framework. He cautioned that without changes to the scheme—as sought by industry stakeholders—the company might diversify its sales strategy, including expanding into electricity markets, supporting data centre operations, and increasing LNG exports.

“We’ve had to modify our capital expenditure to ensure that we’re only executing things that can survive with regards to domestic gas reservation,” Woods said. He further warned that the policy risks deterring investment necessary to secure future gas supplies for Australia’s east coast, where domestic gas producers supply between 65 and 75 percent of the market.

Beach’s ability to consider alternative outlets for its gas reflects its relatively diversified portfolio, including its stake in the Waitsia LNG project in Western Australia. However, Woods noted that smaller producers, particularly those focused on standalone east coast fields without export infrastructure, might face greater challenges adapting if the scheme proceeds unchanged.

Woods reaffirmed the company’s alignment with the government’s objective to secure adequate domestic gas supply but emphasized the need for further consultation and refinement of the policy. He highlighted concerns about the absence of a clear trigger mechanism to activate the reservation requirements, linking previous interventions and pricing targets to a slowdown in investment and upward pressure on gas prices for manufacturers.

Financially, Beach reported a statutory net profit after tax of A$281.4 million for the year ended June, a significant rise from the previous year, largely due to the non-recurrence of impairments recorded earlier. However, underlying net profit declined by 21 percent to A$354.8 million amid a 9 percent decrease in revenue to A$1.92 billion. The company declared a fully franked final dividend of 2 cents per share, bringing the total dividend for the year to 3 cents per share.

Operationally, Woods noted improvements in cost efficiency, including lowering the company’s free cash flow break-even oil price to below US$30 per barrel and reducing operating costs by 18 percent over two years. The company aims to bring the Waitsia gas project to full production and is pursuing exploration opportunities in the Otway and Perth basins, despite the prevailing policy uncertainties.

Beach shares closed slightly lower following the announcement.