Thank you for standing by, and welcome to the Beach Energy Limited Strategic Review briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Brett Woods, Managing Director and Chief Executive Officer. Please go ahead.
Thank you very much. Morning, all. Thanks, everyone, for joining us this morning to go through our strategic review. I am also joined by Anne-Marie, our CFO, and Derek, our Head of Investor Relations. I'll be doing the majority of the speaking today, and I'll be available for questions at the end of the session. We jump forward to. I'll let everyone read the disclaimer at their leisure. I think the challenges for Beach over recent years have been well documented. To me, it was clear when I joined in early February that a full reset of Beach's operating model and strategy was required. The strategic review is our first step in addressing the challenges as we rebuild trust with the market and earn that right to grow.
Today's presentation aims to articulate our refreshed strategy and operating model, update on which assets are core and which are non-core, similarly with the organic growth projects, demonstrate progress to date on cost reductions and new targets we're working towards, convey our disciplined approach to inorganic growth. We also aim to rebase expectations today, and that includes, our initial guide on where production and capital expenditure are tracking in 2025, given this is before full year in August, and our likely revisions to our 2030 reserves position, 2024, sorry, reserves position. I think that is a critical part of our journey today. Moving to the next slide. Just a quick snapshot of what we're talking through. We've reviewed our purpose and vision, and that can be observed on this slide.
Critical, our financial targets, the way we're gonna run the business, focusing on our core metrics, including our guidance to AUD 450 million worth of sustaining capital expenditure and facilitating our disciplined operating model, which is very much in line to what Kevin Gallagher originally introduced at Santos, which is making sure that we are free cash flow breakeven positive at less than $30 a barrel oil. We'll make sure we do this within aligned to our sustainable operating principles and delivering that against our Climate Transition Action Plan. Our key value drivers are really critical for how we're getting here. So despite today's recent market expectations, which I think were overdue, our near-term production on production and reserves, the fundamentals for Beach our asset portfolio and growth are compelling.
As well as catalysts outlined in this slide, it is worth remembering the macro backdrop against which we operate continues to strengthen. The world needs our products for decades to come, and I'd like to reflect on the recent Future Gas Strategy that the our current government put out again, indicating the importance of gas well past 2050. But this recognition of gas has been accelerated through the recent conversations I've had throughout South Australian and Victorian governments. And fortunately, for Beach, we are uniquely positioned to harness the ongoing demand for gas and liquids in both the East Coast and West Coast markets. Slide seven reflects our purpose and vision.
You know, quite simply, I want to drive Beach to become Australia's leading domestic energy company, and we'll do that through the lens of delivering leading shareholder returns, through the sustainable supply of energy. I've used energy in this context to really reflect that we're not just a oil and gas producer, but the future, I see great opportunities to do things in storage, as well as potentially through gas peaking across the east coast of Australia, given our fantastically located assets in the Victorian and Western Australian markets, where, as per the AEMO forecast, the desperate requirement for gas peaking is ever present. Moving forward, our strategic horizons are really focused on several key points. Our strategic horizons, sorry. Our base is profitable and resilient.
We want to have low-cost, high-margin assets with a very strong balance sheet. We're refreshing our exploration inventory, looking at things like the Western Flank and ensuring that we have drillable prospects in our inventory for the 2026 financial year, and we'll do this through the lens of our Climate Transition Action Plan. This really is the foundation for us earning the right to grow. Growth, we want to refresh our portfolio and pivot to longer-life assets. Our asset portfolio at the moment is full of assets that are high value but short-lived, so that pivot, I think, is really important. We'll be looking through strategic acquisitions, but doing so in a very disciplined way.
We want to maintain our diversification across our domestic gas, liquids, and LNG portfolios, and as I mentioned before, looking at our gas storage options. And the extension is with things like gas storage, is that push to potentially move into gas peaking. We've done quite considerable work about the value of that. And though I don't have significant information to update today, it's certainly something that we see adds a lot of value for our, for our business. Our operating principles are outlined here in this slide. Strictly, we're gonna move to a free cash flow breakeven oil price of less than $30 a barrel. We have our target of reducing our field operating costs to less than $11 a barrel, and maintaining our sustaining CapEx to around that $450 million per annum.
This connects nicely to our capital management framework, maintaining our strong balance sheet with gearing, targeting at less than 15%, and with the ability to flex up to 25% through the cycle as required. Our disciplined growth means that we'll be using, and we'll be outlining further in the pack, our rates of return that are required to deliver investments for our portfolio. We maintain our shareholder return focus, which is 40%-50% of pre-growth free cash flow for fully franked dividends. This is really important for us. As we rebuild trust, we pivot to growth under, in a disciplined environment, and make sure that we deliver strong returns to our shareholders. Organizationally, we've made a strong reset. We've recently introduced Glenn Watt.
Glenn Watt has just joined us from his time at Santos, where he's been vice president of the onshore business across Queensland. Glenn is a very experienced oil and gas professional that is well-versed in delivering low-cost discipline operations, and I'm really keen to see Glenn join us in the not-too-distant future. We have undertaken a significant refresh, and as you can see, Bill Ovenden has joined us as the EVP Exploration and Subsurface. Bill, fantastic experience across the offshore Otway, the Cooper Basin, and Western Australia. It's gonna be very valuable to me and the business to make sure that we can unlock future value and deliver exploration opportunities with the highest integrity. Bill also will be accountable for maintaining our reserves position moving forward. We do have some gaps still in our executive leadership ranks.
Many of the recruitment processes are well underway, and I look forward to updating the market as they are landed. Just a quick update on the market dynamics. As you can see, the market is effectively unchanged for us. We see structural supply deficit is persistent, and ongoing and growing. The outlooks for the West and East Coast market support our focus on our core hubs, and the supply deficits for global liquids provide strong support for oil pricing moving forward, which in turn provides opportunity for more oil-linked price exposure to enhance our margins. The interesting thing we've seen across the East Coast over this last weekend is, as it gets colder, the market has shifted to spot pricing in excess of AUD 20.
So the opportunity across the East Coast is exciting for Beach, who have a large position of 50 terajoules a day of uncontracted gas becoming available in the middle of 2025 calendar year. Our core hubs, East and West Coast, are the locations of those core hubs, with the Cooper Basin and the Otway Basin assets reflecting connection to the East Coast market, and obviously, our assets through the Perth Basin connecting through to that base through there. Our acreage is not only connected to those markets in terms of gas, but also through the electrical networks, through particularly our Otway Basin assets, which is really exciting, with the optionality for storage and the optionality for Future Gas Peaking and other asset-based adjacencies.
It was great to bring Enterprise online this week, and we have seen a significant step up in our Otway sales volumes. In fact, over the weekend, we were producing in the order of 194 terajoules a day out of the Otway. And over the last two days, we've been doing peak rate testing for Enterprise as we bed that asset down. That rate will settle down over the next few days as we do some different rate testing across that asset. But I wanna direct people to the fact that we'll be able to, looking forward, deliver guidance of 150 terajoules a day for the first half of FY 2025, as our guidance for take or pay out of the Otway Basin assets.
We then come to set take or pay volumes later this year with the addition of our last two Thylacine wells, which are coming online in the next several months. With getting those in place, we'll be well placed to set our take or pay levels for the coming second half of FY 2025. Exciting as well is our opportunities. One of the things that I've been very much focused on is ensuring that we have scale in our portfolio. I have been concerned when I initially joined Beach that we were heading on a treadmill capital-type trajectory.
So we're looking at opportunities such as Hercules and Mavis in our late 2025, early 2026 campaign with our offshore rig to execute prospects well in excess of 100 BCF each. Those opportunities at that scale gives significant value to deliver, great rates of return and additional volumes of gas into that desperately short East Coast gas market. With regards to assets such as La Bella, you don't see that on this page. We've elected not to move forward with La Bella. That doesn't deliver us the rates of return that we think are sustainable for our business. So we're very much focusing on executing things like Hercules, that have scale, and that gives us the ability to dent.
To tie back to Artisan to deliver more gas into that East Coast market. We skip on to the West Coast. Critically, we're all waiting, I certainly am, for the startup of Waitsia's gas plant. A critical next milestone will be the introduction to gas to the Waitsia facility, and that is timed for end of July this year. You would have the market would have noticed that there's been several dates that have been initiated for the ultimate startup of the Waitsia plant. Over the last few months, the dates that Clough have indicated have shifted closer to our expectation, so I can't guide any sooner than early 2025 as our expected ramp-up date.
The headroom that we had in our production startup has been slightly by Clough over the last few months, and they're now trending towards late this calendar year for their expectation. So our headroom that we gave ourselves for any merchant scope has been shrunk effectively, but we still feel confident that early 2025 is the appropriate time to ramp to start the ramp-up. We're also forecasting a 3- to 4-month ramp-up period, which is indicated, you can see through later in the pack, the uncertainty associated with FY 2025's production. You know, the criticality of getting Waitsia started up and the criticality of doing that ramp-up quickly is really important to our FY 2025 production. We've also had significant success with our recent well at Redback Deep.
That flowed at around 53 million standard cubic feet a day, which is an excellent outcome. And I think critically, what it's done is it's kind of rebased my expectation a little bit. We see a trend, heading north and south of Redback Deep, that has very similar life opportunities to that, that success. So we're looking at. We're excited about the opportunity there. However, you can see in, features such as Trigg Northwest, that we have that, well flow, that's delivered a non-commercial, quantity of gas. So we're looking at, the total portfolio and making sure that we time our execution across the broader Perth Basin to develop, the reserves, as appropriate.
In terms of Waitsia, we have our final stages of our development drillings for Waitsia Stage 2 coming up over the next years. They represent the last phase of our growth capital expenditure for the Waitsia infrastructure. And moving forward, after Phase 2's drilling, we'll be describing our Waitsia drilling or our Perth Basin drilling, the sustaining capital for our ongoing production. Moving to the next slide. We also have highlighted our non-core asset portfolio. And as you can see, New Zealand, the assets at the Bass Basin, which we've recently taken impairment of, and our SA Otway position currently sit in our non-core asset base. So what does that mean?
With assets such as New Zealand, which still generate strong free cash flow, we'll be either looking to continue to run them down for value or alternatively, looking for opportunities to divest assets such that. But as always, safety takes precedence. We'll be focusing on making sure we've got a strong, small operating team looking at those, and delivering value throughout that, throughout the cycle. The opportunities within the Bass assets and the SA Otway Basin do have great opportunities for storage and gas peaking, so we could be looking at repurposing some of those assets. So what non-core assets mean for us? It's either run for value or divest, or alternatively, seek to repurpose those to deliver additional value in our portfolio.
As we know, the prices we're currently seeing in Victoria, a storage asset adjacent to our fields is gonna become incredibly important and delivers us higher rates of return when the market needs that gas the most. Here is a slide that seeks to represent some of the costs out and capital expenditure reductions we've been able to facilitate across our business over the last four months. Starting at the top, which is our labor and associated costs. So far, we've delivered around 23% headcount reduction of our 30% headcount reduction target by the end of the year. That has improved our bottom line by AUD 50 million.
The target as we head to the end of the year, delivering that 30% headcount reduction, delivers between AUD 65 million and AUD 75 million a year of value. The range representing things such as the associated costs that those people bring with us, i.e., things such as travel and other IT infrastructure support. Those numbers can't be added to the next two capital pools, the field operating costs and sustaining capital. Much of the delivered and target numbers there are blended within those numbers. So when at the start of the presentation, I highlighted AUD 150 million worth of targeted savings, that represents the AUD 100 million sustaining capital expenditure, plus the AUD 50 million worth of field operating cost expenditure.
What has been delivered so far is, AUD 35 million of field operating cost improvements, and we're on track, and we've deferred as well as delivered, sustaining capital expenditure improvements so far this year. Critically for us, we need to deliver more. We are focused on delivering more. We have to convert some of the deferments into sustaining capital, expenditure reductions to make them structurally, fixed for the future. That is very much the focus of the team at the moment. I think one of the key things that you'll reflect on the right-hand side is, particularly in terms of our sustaining capital expenditure, is we are, dominated by non-operated, CapEx, expenditure.
I've been working very closely with Santos, particularly over the last few months, to work on our cost out initiatives across the joint venture. And I know that Kevin will be looking forward to updating everyone about that in their results later this year. But I'm very encouraged what I'm seeing through the work that Brett Darley and his team is doing, because we need to get those improved. Since COVID, those costs have gone up, and they reflect our biggest next challenge to reducing costs across our broader portfolio. We go to the next slide.
So in terms of our field operating cost reduction, you can see that it's a little bit of a journey between where we are today at around $17 a barrel oil equivalent, to our guidance for 2025 at $14 a barrel oil equivalent. And then finally, our target in FY 2026 of $11 a barrel. And why there's a journey there is really a function of the timing of Waitsia start-up and the impact of those low-cost barrels coming into our portfolio. Delivering these cost savings has really been a function of our organizational structure efficiency, the costs we've been able to deliver through labor, working with our service providers to lower their operating costs and deliver better, lower cost services.
Obviously, we're working with our joint venture participants, including Santos and Mitsui, to help drive those costs lower and lower. We are targeting, to be clear, 30% reduction in our unit field operating costs to AUD 11 for FY 2026. If we look through the sustaining capital expenditure reduction, and we'll start with where we are today, currently, we're trending towards the top end of our current guidance, which has been between AUD 900 million and AUD 1 billion Australian dollars. Our growth capital expenditure represents AUD 375 million-AUD 425 million in that, and our sustaining capital expenditure represents between AUD 525 million and AUD 575 million.
Moving forward, we see we're on track to deliver a 20% reduction of our sustaining capital expenditure, and we're guiding for FY 2025 between AUD 425 million and AUD 475 million. So what is in that sustaining capital expenditure? I think it's important to highlight. And what can be seen through here is the large dominance that the Cooper Basin Joint Venture has on those numbers. So, AUD 230 million is Beach's net share of operating that 4-5 rigs across the Cooper Basin. And approximately 50% of the AUD 150 million sustaining business capital is also related to the Cooper Basin joint venture costs.
So as you can see, working closely with Santos, working closely with Kevin and his team, can deliver us significant improvements in our sustaining capital expenditure, and I'm looking very much forward to working with them on, on delivering that. It's obviously where we're, where we're operating, we've been able to deliver fantastic outcomes, and we have to, become better at working much more collaboratively with our joint ventures to deliver, that type-- those types of savings across all our assets. What I, I've also had in that pool is the, the assumption in, 2026, that we'll be doing around AUD 30 million of Western Flank drilling. That will start late in Q4 FY 2025. Slide.
I think one of the things that I'm pleased about and really is reflect positively about the attitude that I'm seeing within the business is our focus on driving our lowering of our free cash flow breakeven in the business. We're currently running at around $54 a barrel, which is I think pretty much speaks to the heart of the challenges that we've had to address since I started at Beach earlier this year. We are guiding towards FY 2025, being at around $30 a barrel free cash flow breakeven, which is a fantastic outcome. I'm really proud of how we've been able to get there.
You know, we also highlight our free cash flow sensitivity of around $75 million for every $10 above that $30 a barrel. And I also want to highlight that that steps up significantly when the low-cost Waitsia oil production comes online early next calendar year. Those steps, we've also kind of highlight our mix between oil links pre-Waitsia and post-Waitsia. So we see a very strong build-up in our oil link value proposition associated with our business. So, Beach is really well-positioned to take advantage of that global shortage in terms of oil pricing against our current contract books.
What I've also tried to do is indicate how we're going to manage our business in terms of marketing our gas and protecting our free cash flow breakeven. So the schematic on the left is a diagrammatical version of how we're going to manage our contracting book. And at the moment, we do have a large proportion of our East Coast volumes in particular, that are on long-term contracts, but they start to roll off. So if I explain from the diagram on the left, what represents our free cash flow breakeven is obviously our OpEx, our tariffs and tolls, our corporate costs, our sustaining capital costs, and all our taxes and royalties. That represents our free cash flow breakeven across our business.
Above that, as we indicated earlier, is our capital that we can deliver as dividends and also to reinvest in growth. So what I'm trying to do is steer the business into making sure that it has protection to deliver against its free cash flow breakeven, i.e., having fixed price contracts or even potential hedging to make sure that we balance that risk out, but more importantly, to expose more and more of our portfolio to that short-term spot liquid market exposure. The bottom right-hand chart kind of reflects the Beach's East Coast gas volumes in terms of its contracted positions. As you can see in FY 2025, we are still heavily contracted.
But at the start of FY 2026, we have a large volume, around 50 terajoules a day, that becomes uncontracted out of the Beach production in the Cooper Basin. And we're very excited. Well, I'm very excited about utilizing those volumes to purchase good pricing and good market support across the East Coast of Australia. And then the light blue colors there represent the repricing points with our existing contracts. So progressively, you see more and more exposure to spot and short-term pricing associated with our East Coast gas volumes, which I think is a fantastic opportunity and value upside for Beach that's probably not widely understood within the market at this point. So moving forward, positioning for sustainable growth.
Our Climate Transition Action Plan was re-released in April this year. It sets out our emissions reduction targets, which aligns the intent of the Paris Agreement. Beach has already made significant progress towards our decarbonization targets, and relative to our peers, we've already invested in projects such as the Moomba CCS project, which really means that we are punching well above our weight in terms of decarbonization. CCS is a critical enabler for low-emissions energy supply, and our first injection is getting much closer. We are expecting that in the second half of calendar year 2025. The move, the investment in Moomba CCS plant effectively delivers our emissions reductions targets for 2030, and all other investments in this space needs to compete with the other investment opportunities across our portfolio.
Moving to health and safety, we still have a personal safety performance number that is too high. We're really focusing on driving that down, and I'm pleased to announce that over this last six months, we haven't had no reportable injuries within the business. We've also had zero Tier 1 and 2 Tier 2 Process Safety Events. You know, I think one of the questions that you may ask through a period of such significant organizational change is, what I've inflicted upon the business is, are you exposing our organization to any more risk? I'm really pleased to say that the business is stand up. The quality of our people across our field operations is first-class, and I'm very, very pleased to see that in the first half of this year, such excellent ops, safety, and operation performance.
Moving forward, we need to have this as top of mind. We want to make sure that we have that strong safety culture maintained through the organization, and it's certainly a big priority of me, of mine. In terms of our growth outlook, what I've done is try to articulate some of the key catalysts across our East Coast and West Coast positions. Obviously, we've now completed the Enterprise arrangement. Thylacine West comes on in the next three to four months, which will be very exciting for us, as another way to deliver more volumes to the East Coast market.
We also get to reset our take-or-pay for second half of FY 2025, towards the end of this year, with those higher volumes coming out of the Thylacine wells and Enterprise, puts us in very good shape for that. And we're currently planning utilization of our rig slots associated with the Equinox rig facility for late FY 2025, early in FY 2026. Across the Cooper Basin, we are in the middle, and Bill's working very hard on this, refreshing our drilling inventory across the western flank, looking at some of our existing plays, but moreover, chasing new plays that give us more expansion to liquids moving forward. It's really important for us as we see decline across our current western flank production. We need to make sure that we have quality opportunities to backfill.
In addition, as Santos mentioned in their recent investor update, we're seeing good results coming out of play types such as the Granite Wash. We're looking forward to operators' continued focus on cost and continued focus on drilling those play types for delivering great rates of return and higher volumes. Our cost optimization project is really critical for value for both Beach and for Santos across the broader Cooper Basin. With regards to the Perth Basin, we're also refreshing our drilling inventory, particularly through a Redback Deep, that has really excited the exploration team to chase those opportunities down that central trend.
We're also looking at our development work associated with the discoveries that we've made over the last few years, making sure that we get those tied back in a timely manner, and with another drilling campaign potentially coming in FY 2026. As mentioned earlier, our target for first gas remains in early calendar year 2025, and we're suggesting that our plant production ramp up being that three-four months. Debottlenecking will come, but it's not until we have our peak rate test across the Waitsia plant that I can give guidance to what I think that plant can debottleneck to, without further capital investment and potentially with further capital investment. I think one of the key opportunities for us in the Perth Basin is that conversation that I've had before about collaboration.
Collaboration is really important and, I think that it makes most sense for all parties that we utilize the installed infrastructure there today, rather than continue to invest in infrastructure across the broader Perth Basin. Everything in our portfolio must meet our disciplined investment hurdles, which are categorized by this slide. We have disciplined framework for oil, gas, and LNG. You'll note that the oil has a higher rates of return. That really reflects their short life, so make sure that we can deliver value to keep investing and keep growing value through that. Those opportunities deliver very, very strong, fast payback and important barrels. So very keen to see that refreshed portfolio coming up in the Western Flank. Across our broader gas portfolio, we're utilizing 12% rates of return as our focus.
We're trying to pivot as well to the long-life, stable production assets, to give us less, flex up and down, and give us much more predictability in terms of our annual production across our business. And finally, we talk about value chain. And for us, really, this is speaking to our storage opportunities and potential gas peaking opportunities, the future of CCS opportunities, and so on and so forth. Again, we think that, you know, an organization like ours needs to make sure that those opportunities have reached the investment principles across the remaining parts of our business. We need to make sure that across the life cycle, these opportunities are free cash flow breakeven, and we continue to improve our corporate free cash flow breakeven through any acquisitions that we may make.
Just to give you a little bit more color about some of our adjacencies. Obviously, in the dark color here is kind of our core business. This is what we do. We generate oil and gas, we generate LNG, condensates, and LPGs, which are selling to the market. We have a very strong marketing and trading team, I'm looking to strengthen further as we move forward, and we would like to move more into storage. We currently have storage within our Cooper Basin assets with Santos, but I see a great opportunity for us to position ourselves more fortunately in storage across the East Coast gas market, particularly in Victoria. And that gives us the opportunity to do things like gas power generation through peaking through our existing infrastructure base.
One of the things that we don't have any capability at this time, and I'm not sure it's an area that we really wanna focus on ourselves, is electricity marketing or that trading. We'd be looking at working with others to help facilitate that, where I have absolute confidence that I can build power gen. We've done that many, many times in the past. We'd like to build that at scale to help support our value proposition, and ultimately work with some of the larger players to facilitate our access of those electrons to the broader East Coast electricity market.
I'll be able to bring more information to that as those studies mature, but it's certainly an area that I'm very, very excited about. In terms of our strong financial position, I think what I wanted to do here is to demonstrate that. Our current net debt is sitting around that high AUD 400 million. We have equity well over AUD 3 billion, and our current net gearing is sitting at around just under 14%. We hit peak gearing later this year, and well aligned to our target of having gearing around 15%. We will be looking to lever that down as soon as Waitsia comes online. But as you can see, one of the strongest balance sheets of our peers going around.
Our gearing is really linked to Waitsia and obviously what we're seeing in gas prices and liquids prices over the next few years. So our outlook and this is probably coming to a really important and critical slide for everyone. We're currently FY 2024 trending to just above that 80 million barrels production level. Through the KS-9 well, we're seeing that well didn't work out. We had that recent impairment. We're seeing lower production there. Our Bass asset is coming to the end of field life. Again, we have done an impairment on that asset over the last few weeks, and you can see that we've got accelerated decline across Bass, which we're focusing down on production there.
We're seeing high annual declines across our Western Flank portfolio. That is a function that we haven't been drilling in the Western Flank over the last eight months. And we're looking to not execute additional wells up until late FY 2025, early FY 2026. So we expect our liquids production to fall during this period. And obviously, across the Cooper Basin, we're seeing relatively flat production, and we're very much in line to operators' forecasts for that asset. Where we have a significant upside, obviously, is in our Otway Basin. And I've taken the appropriate conservatism associated with those forecasts to reflect the flexibility that Origin has through that contract.
We've been able to improve the capex levels, but they can spread their capex burden across a calendar year, where we forecast across a financial year. So there's a little bit of difference there. So what we're doing is, you know, just being prudent and conservative with our Otway production. And similarly, you can see through the Perth Basin, and you may be wondering why there's a bit of an overlap there, between that and the Otway Basin assets, and it's really a function of when it ramps up and really starts to come online. So there is significant upside associated with the Perth Basin, the earlier we get that on, but we're not going to guide that at this point in time.
I think it's prudent for me to maintain some conservatism around our production profile. You will see that the range, the 17.5-21.5, is very broad. It's very broad because we're still very early in the cycle. I will look to sharpen up that range as we move into full year accounts later this year. But I thought an appropriate broad range is important. You know, really, one of the key focuses for me through today is to completely reset the business expectations and to make sure that I have a solid base in which we can move forward from. So I would take very much that as the position we have in terms of our production.
Our capital structure, as I mentioned before, just, but just to reiterate it, we're guiding between AUD 700 million and AUD 800 million, with our sustaining capital being AUD 425 million to AUD 475 million, and our growth capital between AUD 275 million to AUD 325 million. Obviously, that is really a function of Moomba CCS and final stages of Waitsia stage 2 drilling, as well as the project execution piece. We keep moving forward. In addition, through the strategic review, I've decided to do a very deep assessment of where our current reserves position is. As previously highlighted through the impairment, there has been a write-down associated with the Kupe South-9 value story, which obviously has an impact on reserves.
So, though we haven't finalized our reserves position, I always thought, I think it's also prudent to give people a steer about where those are going. So across Kupe, we're expecting to see, in the order of that, circa 7 million barrels of reserve reduction associated with Kupe. In the Perth Basin, through the drilling of the Beharra Springs Deep well, we have made an overall downward assessment of the broader Beharra Springs field. We saw lower reservoir quality than expected, and we've extrapolated that across the broader Beharra Springs closure, which has made a reduction there. In total sense, the Perth Basin, the impact of the Perth Basin is in the order of 4% of its current book reserves.
We've seen upsides associated with Redback Deep, which has given us a number of circa around that 5 million barrels of impact, associated with those assets. There is no change at all to the Waitsia reserves. They remain intact. It's really associated with the Beharra Springs asset, where we've seen lower reservoir quality and potential connection to a fault that has limited our current estimate of that asset. Associated with the Otway Basin, we're also seeing across our Thylacine North wells, which came online in May this year. They have been depleting a little bit quicker than what was expected pre-drill and what has been expected in our reserve position. That has. Early depletion is typical of these wells.
What they do not then do is connect to a broader core volume, and they flatten out. These wells have depleted slightly faster than all offset wells. So I found it prudent to take a write-down against those volumes, effectively representing about 6% of the Otway volumes in total. But I'm steering people to around that 5 million barrels of impact against our broader Otway position. That has no impact to the upcoming Thylacine North wells, just to be clear. This is really just around the, sorry, Thylacine West wells. This is just really around our Thylacine North wells that have come online in May. Minor revisions around the Cooper Basin, just to be in line with operator. So where are we? What have we done? We've completely refreshed the Beach strategy.
We've refreshed our organizational structure. We've identified our core hubs and focused on those core hubs to deliver value. We've instilled strict operating principles with setting new financial targets across our business. We've instilled a disciplined investment framework to make sure that we, through growth, we execute things that are accretive and valuable. So far, we've delivered AUD 135 million of operating costs and capital reduction savings across the business, 23% headcount reduction currently executed, with AUD 35 million of field operating cost savings and AUD 100 million of sustaining capital expenditure reduction. Where do we want to go? We want to continue the journey of further cost savings and reductions. We will reach our 30% headcount reduction this year. We will deliver in FY 2026 our field operating cost targets of $11 a barrel.
We will be moving our sustaining capital of reduction to around that AUD 100 million. That is converting some of the savings we have today, but as well as to chase additional savings and make sure that they are structurally locked in place. We will deliver in FY 2025 our $30 a barrel free cash flow breakeven. The other focus areas is we're really focused on our additional exposure to short-term and spot sales, giving Beach more and more exposure to global liquid trends. We are going to deliver our 40%-50% of pre-growth free cash flow for fully franked dividends, which I think delivers significant value to our shareholders, and we are looking very disciplinarily at potential acquisitions across the portfolio.
As I mentioned several times in today's presentation, I see great opportunity for Beach to participate in storage, as well as potential for more adjacencies with things like gas peaking across the East Coast gas markets. In final summary, our ambition is to become Australia's leading domestic energy company. We are connected to and will be supplying Australia's key energy markets. We have a very strong financial position, and we will be increasing free cash flow for dividends and growth.
We have multiple near and mid-term value catalysts, and we have opportunities such as CCS, which has us aligned to our Paris obligations, and it supports our decarbonization and focus on making sure that we have abated oil and gas portfolio within our business. In that, I would like to conclude the formal part of the presentation and open up to the floor for any potential questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Adam Martin with E&P. Please go ahead. Adam Martin, your line is now live. Please proceed with your question. Your next question comes from Gordon Ramsay with RBC Capital Markets. Please go ahead.
Oh, thank you. Brett, I'm just interested in your new strategy of getting involved in gas storage and potentially peaking. I'm just wondering how you would plan to kind of implement that. Would you be looking for a joint venture partner with expertise in, for instance, gas peaking, you know, electricity generation, or would Beach plan to do this all on their own?
I think I'm comfortable with the generating of the electrons. What I'm not comfortable with is the energy markets exposure. So, you know, I would be looking for a partner, you know, one of the larger Australian utilities to kind of work with on that. I think there are several that I've had, you know, very high-level conversations with, but I think that makes perfect sense. So, you know, building infrastructure aligned to our existing asset base, whether that be at Katnook or whether that be across the broader Otway Basin asset base, I think is very achievable for Beach under its own steam. But ultimately, you know, what I don't really want to build is a retail desk or energy markets exposure.
I don't think we have latent capacity to do that ourselves, so I think that will require a collaboration with one of the large retailers through this sector. And I think some of those larger retailers are struggling getting peaking infrastructure built themselves. So I think there's a great synergy between a group like ours and some of the large energy market players.
Just the obvious question on Waitsia, yeah, it looks like it's pushed out a bit further. Is there anything that's come up in the last few months that has led you to do that? You're saying, you know, Clough's obviously moved closer to Beach's time frame, and any slack that they had in their profile is gone now. Can you just comment on what caused the changes there?
Yeah. So, we haven't changed our guidance. I think the timeline that Clough had is more getting aligned to ours. I think the key—there hasn't been any new quality issues that have been raised at all. I think the reality of the situation is they're not getting the productivity numbers high enough across their execution. I don't think you can put any more people at site. They're effectively at max people capacity. And I think part of it has been pivoting from the rectifications that have been going on in the last few months, and more forward, moving to the pre-commissioning phases at the moment. But unfortunately, now, they're doing things like the pressure testing, which is good.
And I think the critical milestone, which is first gas at the end of July, is really important for us to kind of make sure that we can deliver this, with either late this year, which is aligned with their schedule, or early next year, which is aligned with ours.
Well, first gas, end of July, and then you're saying start up early 2025, with three to,
Sorry. No, no, no, no, sorry. First, first gas into the plant for commissioning. That's, Sorry, sorry, sorry, Gordon. Yeah, so it's one of the critical things to getting a plant fully commissioned is introducing the gas into the operating system. We won't be exporting at that point. It's just to test all the systems and make sure everything holds together. And then that effectively has, you know, that four, five months worth of commissioning period before we can start exporting.
Okay, thank you.
Your next question comes from Tom Allen with UBS. Please go ahead.
Hi, good morning, Brett. I was hoping you could please outline more detail on Beach's reserve replacement strategy. Just including what proportion of your reserve replacement strategy is targeted by exploration and appraisal of your existing assets versus organic growth. Just because you've announced net reserve downgrades across all assets, including Perth and Otway today. Interesting that you called out Thylacine North declining faster than anticipated. If you could share a comment on an annualized decline rate you've seen at Thylacine, that would also be helpful.
Yeah, so I don't have the annualized decline rate yet at Thylacine. It's only been on for several months. Those wells typically come off quickly and then plateau out, and we're just waiting to see the plateau until we're absolutely sure where we are in terms of that. But I feel the reduction there is more than ample to cover any contingency. In terms of reserve replacement ratios, we have a great array of opportunities associated with things like Hercules and Mavis, associated with the Otway. We're looking at opportunities across the broader Perth Basin. I think the critical one is the Western Flank. We're building the inventory at the moment.
So we have an opportunity to do both organic and inorganic reserve replacement. So I think you're probably more steering on the organic side. So Mavis and Hercules, when they come up in FY 2026, will be important for the continued backfill associated with those assets. And then our FY 2025 program in Waitsia is effectively the development drilling, and then we'll be looking for additional exploration moving forward across our footprint in those assets.
Thanks, Brent. It'd be nice if you just elaborate a little bit further about Hercules and Mavis prospects, maybe with some color on your P50 estimated gas in place, what an indicative development plan might look like, and also, what proximity do these have to the drilling that Conoco is doing in the Otway?
Yeah, in terms of Conoco's drilling activity, it's much further outboards than our assets. So Hercules is in close proximity to our existing Otway gas infrastructure, so it'd just be a tieback through the existing facility. So if Hercules success, we would tie that via Artisan through our existing plants across the Otway Basin. We don't have any current targets around the Bass assets, so this is all coming through the Otway footprint. And then Mavis is a little bit further down the coast, but well in tiebackable to again our Otway gas plant facility. Both Mavis is well in excess of 100 BCF. And Hercules is in the mid- to high 100s in terms of BCF category.
I haven't given any more clarity about. What we'll look to do is give a opportunity refresh at our full year results, and I'll give Bill an opportunity to speak to the exploration targets and the scale of those as we work through those with the joint ventures moving forward.
Thanks, Brett. If I could just sneak one more, just for hoping for a little bit more color on the, the gas storage asset, that's adjacent to some of your assets. So which, which asset specifically, could you just tell us a brief comment about the drive mechanism and perhaps what your estimated storage, injection, and withdrawal capacity or a range around what you think it might be able to do?
Yeah, so we're looking around the Black Watch, Speculant, and Halladale, really the nearshore facilities. Very, very high delivery rates. I'll give full details of those. We're still kind of in the mid-studies. It's looking really exciting for us, but I'll give an update to that at our full year. But very close to our existing infrastructure, and high export rates, which is a critical enabler for quick response when Victoria needs it. Yeah, that's probably the best way to describe that.
Thanks very much.
The other one is Katnook as well. So Katnook's on the South Australian side of the Otway Basin, and South Australia is moving to a world of a gas capacity mechanism. So we're looking to work with the South Australian government to be able to support them through gas storage as well as peaking supply as that market. Which is an interesting one for me, with South Australia with the highest level of renewable penetration anywhere, the importance of gas peaking as an enabler for further renewables is kind of well understood now by governments, and I'm keen to see both the Victorian and the South Australian governments head in this direction.
Thanks, Brett.
No worries.
Your next question comes from Henry Meyer with Goldman Sachs. Please go ahead.
Morning, Brett. Thanks for the updates today. Just a question on the sustaining CapEx outlook. It's probably a bit higher than the market may be expecting, still targeting another AUD 100 million cost out per annum. Able to touch on a bit of color around, you know, what are some of the bigger ticket items required here to get that cost out? Does the target include divestment of the non-core assets as well, please?
Yeah, I think one of the big drivers to lower that is Bass. Bass still represents a large of our large cost base in our operating costs, but there's also some sustaining costs in there as well. You'll see from the pack that there is a lot of costs associated with the SACB joint venture. So I think critically, success for us is working closely with Santos to help facilitate the lowering of sustaining capital through that base. You'll note that the areas that we're in charge of, we've done a significant job on sustaining capital. So, you know, that close working with both Mitsui and Santos will help deliver additional improvements against our sustaining capital exposure base.
Okay, thanks, Brett. And back on exploration, some of the prospects here, you've got a good pipeline of organic growth. But we're expecting reserve write-downs at most assets this year. When you completed the review, was there anything identified in particular that contributed to some of these disappointing subsurface outcomes? Any changes going forward to reduce that risk in the future?
Yeah, so I think, you know, for me, having Bill Ovenden on board is a real positive for me, given he's run Santos' subsurface for many, many years. So that discipline through his business is really strong, so I'm looking forward to having that as a close ally to the business. In terms of the reductions across the broader Perth Basin, I think most people have seen highly variable outcomes across the Perth Basin.
Whereas when some of those volumes were booked, I think there was much more confidence in the connectivity across the basins. And what we've seen through our own drilling and through the drilling of peers is much more variability in subsurface than what was originally envisaged. In my mind, I've taken a prudent view of making sure that I don't have overhang moving forward. I don't want to be coming back to the market, making further adjustments, so I've taken a view of correcting where I thought it was appropriate.
Got it. Thanks, Brett.
Your next question comes from Nik Burns with Jarden Australia. Please go ahead.
Oh, thanks, Brett. Maybe starting off with FY 25 production guidance and your reserve updates. I'm sure you're aware in recent years, Beach has a bit of a track record on not being able to meet its production guidance estimates. So this is your first opportunity here to set production guidance and review reserves. I'm sure you're aware the guidance range is below consensus estimates. So within this, I guess three quick questions. One, how confident are you in achieving this production range? Two, what's the biggest variable in this range? And three, what would you say to those who would think that your forecast here might contain a layer of conservatism, and could you potentially beat your numbers presented here? Thanks.
I'll try and answer them in reverse. Yeah, my absolute ambition is to beat our consensus. And I think very much in line with the view that I've, you know, if you look back at Beach's forecast over the last five years, they've assumed a lot of volume coming out of things like commercial efficiency, which, you know, you've seen over the last 12 months with the flexibility that Origin had, that it can't be delivered. So I've taken a very prudent view to how we're building our forecast, and my goal is to beat them. So I think, you know, I think what I've given is a good practical range. I don't imagine that I'll fail on the downside.
I don't wanna put myself in that position where I fail on the downside. So I've given myself a range that I can deliver within. I think the critical uncertainty associated with our production is probably the rate at which the Western Flank-- I'm sorry, not Western Flank. The rate at which our Waitsia ramps up. You know, getting an accelerated ramp up out of Waitsia adds significant volume to our portfolio. Getting high offtake from the Otway, you know, if we have a long, cold winter, and as we see further and further shortages out of the other operators in the Otway Basin, we see upside associated with both Otway and both Perth Basins.
And then ultimately, delivering a program that unlocks value in the Western Flank is gonna be critical. So, you know, I think the negatives are really the Taranaki, i.e., the Kupe Field and the Bass areas, which we took the impairment on. Western Flank has upside. You know, you look through what Santos are trying to deliver through the Granite Wash and their upcoming program. I'm hoping that we can see some upside associated with that production, and growing from where it is or we're currently targeting flat. And then there's upside associated with Otway and Perth Basin. But what I've tried to do is deliver a range that I feel comfortable with, and I can deliver against.
That's clear. Thanks for that, Brett. Maybe just one on inorganic growth. You talked previously about wanting to earn the right to do M&A, and that right would be earned through executing on your cost out strategy. Do you feel that, that you've now earned that right? So are we right to think that M&A is now firmly on the radar, and we should expect Beach to be actively involved in any opportunities that appear in the market? And I know you didn't really restrict yourself to M&A in Australia, so, you know, could you look overseas as well? Thanks.
Yeah. Again, I'll do it in reverse. No, I won't be looking overseas. I'm really excited about the opportunities across the East Coast and West Coast. I think there's opportunities there to participate in. You know, I still don't think I've effectively earned the right at this point in time. I still need to deliver opportunities, and I think the question before about sustaining capital is one of those. We need to make sure that we deliver against our expectations and our goals. And that is really important. However, there are opportunities out there. So I would hope that, you know, later this year, maybe early next year, after. You know, unfortunately, it's only been four months for me.
I don't think you can trust me at this point in time, but I hope as I continue to perform in terms of demonstrating our cost diligence and our performance against operations, then I'm sure, Nick, you'll be one of the first people to tell me whether you think it's time for me to move forward. But at this point in time, I'm happy to, happy to look at opportunities, but I'm not gonna be executing anything in the near term.
That's great. Thanks, Brett.
Your next question comes from Mark Wiseman with Macquarie Group. Please go ahead.
Yeah. Morning, Brett. Thanks for the update today. Just a few questions. Firstly, on the sustaining CapEx, I just wanted to clarify that the AUD 450 million, that is after the AUD 100 million per annum of savings? Has that all sort of been harvested in that AUD 425 million-AUD 475 million, or is there more to come in FY 2026?
No, the AUD 425-AUD 475 includes the AUD 100 million of savings.
Okay.
So yeah. Sorry, I'm not sure if that was the question before. There's not another AUD 100 million coming off that in 2026.
Yeah. Yeah-
I guess-
Just wanted to
Clarify that. Yeah, just to add to that, Mark, obviously, we did talk to sort of. There is sort of potential further opportunity through working with Santos on the CB JV, which is where a large portion of the costs come from. So there's potential for further cost reduction there, but not baked in.
Yeah, it's a really good point, actually. Just so everyone's clear, I haven't included any cost reductions across any of our non-operated assets. So there's no cost reductions associated with our West Australian Waitsia position, and there's no cost reductions associated with our SACB Cooper Basin position, as they're all works in progress and discussions ongoing with operator. So there could be some headroom there, and, you know, I'll continue to work with operator to make sure that we can try and realize some of those.
Yeah, that's great. And that was actually gonna be my next question. I understand you can't sort of front-run what Santos may be coming out with at some point, but how transformative do you think the change in the operating model in the CB JV could be? I think you've highlighted 50% of the AUD 150 million stay-in-business is related to that asset. I mean, are we talking about a significant step change here, or would it be incremental?
Well, it's, I've just received a whole lot of material from them in the last few days, which looks really exciting. I think I would like to dive into that in a little bit more detail. You know, Kevin's a bit of the master of the cost out, and Brett Darley is such an amazing executor that I have a lot of confidence that they can deliver. I'm just not willing to kind of give a quantum at the moment, and I think it's probably best placed that operator directs on that. Hence, we haven't given any specific guidance through here. That is really the mission that Kevin and Brett are currently on.
Okay, great. Could I just ask on Beharra Springs Deep, you've made some upgrades in the Perth Basin while cutting Beharra Deep. I think previously, the Beharra Deep number was about 350 PJs. Are you able to talk about how big Beharra Deep is in absolute terms now?
Actually, I don't have that off the top of my head. I'm sorry. I'll have to get back to you, Mark, if that's okay.
Yeah, but in terms of developing Beharra Deep, does it effectively. You know, I think it's been producing at 25 terajoules a day or thereabout. Is that the plan going forward, or do you intend to sort of ramp up that asset at some point?
No, the Beharra asset has got plenty of resources to continue production through that domestic gas plant that it services. I think there is enough scale in Beharra Deep, in the event that we're able to connect that through to Waitsia, that it acts as really good backfill scale to the Waitsia opportunity. So there is plenty of scale in that asset. So you know, that really is pending on the, what is now a delayed WA state government position on domestic gas. And we're obviously working with not just our joint venture, but the whole industry about trying to facilitate a good outcome for both domestic supply as well as a more export-facing volumes.
Okay. And just finally for me, just on decommissioning CapEx, I mean, we had Kupe producing through to the early 2030s. It sounds like with the, you know, with the 40% reserve downgrade to Kupe, it sounds like that's probably sooner. And then with Bass Gas as well, if you could just talk about when do you expect to be spending decommissioning CapEx on Kupe and Bass Gas?
Yeah. So we've still got plenty of life left in Kupe. It's just the peak rates are gonna be much lower, so we'll be above free cash flow breakeven by a good distance for well into the 2030s, still across Kupe. And Bass Gas, we're currently refreshing our abandonment provisioning, so I don't have any updates today. We are looking at alternative uses for that asset that could potentially also be potential for storage. So we're working forward on that. So Kupe's. Sorry, Bass' end of field life is still not until, I think, late next year.
2028.
Yeah, it's 27, I should say. So we've still got some time to get, to get that right.
Okay, great. Thanks a lot.
Yeah, thanks, Mark.
Your next question comes from Saul Kavonic with MST. Please go ahead.
Hi, Brett. Just one main question for me. Looking just, I think you've given us a really good reset here of the kind of base case outlook that's conservative. But trying to get a sense of what things look like, I guess, on the production front, post FY 2025. I just note, consensus still seems to be around the 27-28 million barrels numbers in FY 2026 and 2027.
But if I look at your production guidance, FY 2025, just excluding Waitsia altogether, it's looking relatively flat. FY 2025 versus FY 2024 at 18 million barrels, and if we add Waitsia on top, that only probably gets us to the 23 or 24 million barrel, maybe 25 million barrel mark. How should we think about production post FY 2025, particularly 2026 and 2027? Just kinda wanna make sure that the market's got a good sense of that, so we don't have an infinite issue coming into the guidance for those years.
Yeah, it's a, it's a really good point. We're currently not physically giving guidance for the outer years, but I would say that, you know, the numbers you said at the start, that 27, 28, I don't see our forward forecasting reaching those levels. I think, effectively around those mid-25 million barrel levels are probably more realistic, with Waitsia online, with Otway performing as it is, and Cooper effectively staying flat. We'll be. I think one of the challenges you've seen associated with assets like the Otway is they're not super long life, not like the Cooper Basin. So opportunities like Hercules and, Mavis give us much more length.
So, what I wanna see is, some of those opportunities come into the portfolio so that that can give us a lot more length associated with the, with our Otway position. So, you know, effectively, we've got a peak production profile, around that 26-27 year range. And we still need to do some more work to, bring volumes in to maintain that looking forward. So there is some decline. I know that the market currently doesn't have much decline associated with those out of years, but there is some decline associated with those out of years, which I can't currently guide to at the moment.
Great. Just a quick follow-up. With the Hercules, or those prospects are way at the end of next year, assuming they're successful, is there a development pathway for them to come online in time to extend plateau? Or would we still likely see a dip before they'd be able to come online?
I think there may be a minor dip, but I guess what we're trying to do is target that 28 timeline, 29 timeline for something like a Hercules to come online. So this is before a, you know, completely concluded the development studies. But we believe we can have flow lines and all that equipment in place, and working with some of the other operators in the regions to have opportunities such as Hercules connected around that timeline. That would, you know, try and limit any dip that we see across our wide portfolio.
Great. Thank you so much. Appreciate it. Cheers. Peace.
Your next question is from Sarah Kerr with Morgan Stanley. Please go ahead.
Hi, Brett. Thanks so much for the presentation. I just wanted to understand why you're not confident into getting into electricity trading if you have a gas peaker. Capturing market volatility is kind of the value proposition of that asset.
Yeah, no, I obviously wanna capture the volatility, but I don't have. What I'm speaking out specifically is I don't wanna have relationships with moms and dads and residential. So accessing industrial electricity supply, I think that could make sense. But the kind of retail sector is kind of beyond where we are at the moment.
Okay. And I just had a question on the Bass Basin. So you've done that impairment. Does that now preclude you from getting a good potential sale price for them for all those undeveloped fields?
No, we've just taken the value off the books. If the opportunity comes-
Okay. Just 'cause you've, like, put a value on them, and now, would you be able to sell them, I guess, for any more than you've put the value on?
Yeah, I think for me, the risk profile is not there for Beach to execute those. So if others see the opportunity to do that, well, then I'm happy to have that conversation. I think it's the right thing to do to take it off the books when we're not gonna execute it within our timeframe. So, you know, it's been prudent.
Okay, great. Thanks so much.
There are no further questions at this time. I'll now hand back to Mr. Woods for closing remarks.
Thank you very much. I appreciate the questions. I look forward to catching up with many of you over the next few days. Again, you know, it's an important reset for Beach. I am very excited about what the future will look like for us. We've got a lot of exciting opportunities, and I'm looking forward to bringing you on the journey with that. So again, thanks very much for your time. Cheers.
That does conclude our conference for today. Thank you for participating. You may now disconnect.