asx release - abn newswiremedia.abnnewswire.net/media/en/docs/asx-bpt-184297.pdf · competent...

for the year ended

30 June 2011

Appendix 4E

Directors’ Report

Annual Financial Report

ASX Release

New Zealand

Albania

Tanzania

Carnarvon andBrowse Basins

Arrowie BasinOtway Basin

Papua New Guinea

Cooper/Eromanga Basin

Gippsland Basin

USA

Equator

Spain

Egypt

PROJECT

LOCATIONS

3 Appendix4E

3 ResultsforAnnouncementtotheMarket

5 Highlights

6 KeyFinancialHighlights

7 Chairman’sReview

10 ManagingDirector’sReview

14 FinancialReview

19 ReviewofOperations

42 GlossaryofTerms

43 CorporateGovernanceStatement

56 FinancialReport

57 Directors’Report

67 RemunerationReport

86 FinancialStatements

91 NotestotheFinancialStatements

143 IndependentAuditor’sReport

Page

TABLE OFContents

Preliminary Final Annual Report for the year ended 30 June 2011 (Rule 4.3A)

Results for announcement to the market

Previous corresponding period – 30 June 2010 $A’000

Revenuesfromordinaryactivities UP 2% to 498,223

Netlossaftertax DOWN 394% to (97,450)

Lossfromordinaryactivitiesaftertaxattributabletomembers DOWN 389% to (96,791)

Lossfortheperiodattributabletomembers DOWN 389% to (96,791)

Dividends Amount per securityFranked amount per security at 30% tax

Interimdividend(fullyfranked) 0.75cents 0.75cents

Finaldividend(fullyfranked) 1.00cent 1.00cent

Recorddatefordeterminingentitlementstothefinaldividend

9September2011 –

Paymentdateforfinaldividend 30September2011 –

Noneofthesedividendsareforeignsourced.

Competent Persons Statement

ThisreportcontainsinformationonBeach’sreservesandresourceswhichhasbeencompiledbyMrGordonMosebyandMrNeilGibbins,whoarefull-timeemployeesofBeach,arequalifiedinaccordancewithASXlistingrule5.11andhaveconsentedtotheinclusionofthisinformationintheformandcontextinwhichitappears.

Net asset backing

Current Period Previous Corresponding Period

Netassetbackingperordinarysecurity $1.15 $1.27

Change in ownership of controlled entities

ControlgainedoverentitieshavingmaterialeffectImpressEnergyLtd

Impress(CooperBasin)PtyLtdSpringfieldOilandGasPtyLtd

Lossofcontrolofentitieshavingmaterialeffect Notapplicable

APPENDIX4E

APPENDIX4E

Dividends – Total Payment

Current Period $million

Previous Corresponding Period $million

OrdinarySecurities $19.175 $39.730

Noneofthesedividendsareforeignsourced.

DiscountRateforDividendReinvestmentPlan(DRP) 5%

LastelectiondateforparticipationintheDRP 9September2011

Recorddate 9September2011

PeriodoverwhichsharepriceforDRPwillbedetermined5tradingdayperiodwillcommenceonWednesday14September2011andend

afterTuesday20September2011

Dateofpayment 30September2011

Dividend Reinvestment Plan

BeachhasestablishedaDividendReinvestmentPlan,detailsofwhichareavailableonBeach’swebsiteatwww.beachenergy.com.au

APPENDIX 4E

Corporate

● Acquisitionof ImpressEnergyLtdviaon-market takeoverat8.5centspershare

● Divestment of non-core investments in Sundance EnergyAustraliaLimitedandRameliusResourcesLimited

● NegotiationswithSantoscommenceregarding thesupplyof152PJ(net)ofgasfromtheSACBJVtoitsGLNGproject

Operations

● Successfulshalegasexplorationprogram

● 2TCF 2C contingent resource booking relating to 100 km2

aroundeachoftheHoldfast-1andEncounter-1unconventionalverticalwells

● ConstructionoftheGunyahsuppliesdepotandKudnarribridge,ensuringthedrillingcampaigncontinuedduringflooding

● Successful exploration, appraisal and development oilcampaignintheCooperBasinWesternFlank

● ThreenewSaxonrigsmobilisedforinfilldrillingintheSACBJVandSWQJVtenements

● FirstproductionfromthetwoUSunconventionaloilwellsintheBakkenplay,NorthDakota

● BeachandITOCHUinvestigatingasmallscaleLNGproject

● GravityandmagneticsurveyscompletedoverLakeTanganyikaSouthblock,Tanzania

Finance

● Solidunderlyingprofitof$41.4million(up7%)frompreviousfinancialyearof$38.7million

● Strongcashpositionof$173million

● Anewmultioptionfinancefacilityof$150millionreplacedthe$35millionworkingcapitalfacility

Subsequent Events

● Successful fracturestimulationofunconventional shalewell,Holdfast-1,withgasflowupto2MMscfd

● Tworigssignedup for thepilotandexplorationprogramsetdownforshaleacreageinPEL218andATP855P

● FirstdiscoveriesintheAbuSennanconcessioninEgypt

FY11Highlights

Set out below is a summary of the full year financial results:

KEY FINANCIAL HIGHLIGHTS

12 Months to June 2011

12 Months to June 2010

Change

Income

Totalrevenue $’000 498,223 489,169 2%

Costofsales $’000 (419,100) (414,652) (1)%

Grossprofit $’000 77,346 72,816 6%

Otherincome $’000 26,043 58,714 (56)%

Netprofit/(loss)aftertax(NPAT) $’000 (97,450) 33,118 (394)%

UnderlyingNPAT $’000 41,430 38,673 7%

Dividendspaid cps 1.75 3.75 (53)%

Dividendsannounced cps 1.00 1.00 0%

BasicEPS cps (8.87) 3.09 (387)%

UnderlyingEPS cps 3.77 3.61 4%

Cash flows

Operatingcashflows $’000 184,530 128,468 44%

Investingcashflows $’000 (171,466) (86,138) (99)%

As at 30 June 2011

As at 30 June 2010

Change

Financial position

Netassets $’000 1,272,522 1,371,556 (7)%

Cashbalance $’000 173,328 169,940 2%

KEY FINANCIALHighlights

CHAIRMAN’SReview

DearFellowShareholder,

Iamverypleased tobewriting toyou inwhatis Beach Energy’s 50th year since it was firstincorporated.ThisisaremarkableachievementwhenlookingbackatthesometimescheckeredhistoryoftheCompany.ACompanythat,byallreckoningshouldhavefallenpreytotheactionsof fraudsters in the late 1980s, that limped itsway back to recovery in the 1990s, is now arisingASX200companywithanexcitingarrayofglobalexplorationandproductionenergyassets.

Since 2008, we have seen a great deal ofvolatilityintheglobalfinancialmarketsaswellasintheAustralianpoliticalarena.Thelastfinancialyearwasnolessstormy,andculminatedinthe

Government’sproposedCarbonTax. Beachhasweatheredthis turbulentyearwithashareprice increase of 35%,well above that of theEnergy Index (XEJ)which increased by 7%.ThisisawonderfulresultandacredittotheBeachteam.Thisperformanceshouldalsobemeasured in the light of a forty year LaNinaevent,which resulted in extensive flooding inBeach’smajorcentreofoperations,theCooperBasin.ThatBeachhassurvivedandprosperedisduetoitsstrongandbalancedportfolioofassetsthatdelivernotonlyrobustoperationalcashflowbutalsocontinuetooffersignificantupsidepotential.

TheBoardand theManagement teamatBeacharewellattuned to riskand itsproperandeffectivemanagement. The business of exploration is risk personified andwe continue tomonitorallaspectsofit,includingthatofsovereignrisk.Weareoftenaskedaboutthesovereignriskassociatedwithouroperationsinotherpartsofourglobaloperations.Myanswertothisissimple:wehavethemajorityofouroperationsinAustralia.

“... a rising ASX200 company with an exciting array of global exploration and production energy assets.”

160%

BPT.ASX XEJ.ASX

130%

140%

150%

100%

110%

120%

90%

1 Jul 10 5 Aug 10 9 Sep 10 14 Oct 10 18 Nov 10 23 Dec 10 1 Feb 11 18 Mar 11 12 Apr 11 19 May 11 24 Jun 11

“... a share price increase of 35%, well above that of the Energy Index (XEJ) which increased by 7%.”

Bob Kennedy, Chairman

Ask,ontheotherhand,isAustraliawithoutsovereignrisk?Afewyearsago,myanswerwouldhavebeenthatitwasoneofthelessriskycountriesoftheworldinwhichtooperate.Itisfranklyconcerninghowquicklythatcanchangewhenideologyandpoliticalopportunismsupplantplaineconomiccommonsense.On theheelsofan ill-conceivedproposal foraResources “SuperProfits”Tax ,nowamended toanuncertainonshorePetroleumResourcesRentTax, in themidstofnewuncertaintiesinglobaleconomies,theproposedCarbonTaxisanothermeasuretaken by thisGovernment thatwill not only potentially stifle international investment in thiscountry,butmayalsoleadtojoblossesforanumberofhardworkingAustralians.Beachhasatleasttheadvantagethatitcanpursueitsbusinessinotherpartsoftheworldwherefiscalregimesandpoliticalstabilitymaybebetteratanyparticularpartofthecycleofsovereignrisk.

Beach’smainproductintermsofquantityisnaturalgas,whichis,inessence,ahighhydrogenfuelandoneofthefriendliestoffossilfuelstotheenvironment.Eventhoughthismayprovidesomenet advantage should aCarbonTaxbe introduced, that is no reason, in our view, tointroduceyetanothertax,indisguise,ontheresourcesindustriesthathaveunderpinnedthiscountry’seconomythroughglobalturmoil. Australia’scontributiontoglobalemissionsis justover1%of the total: this taxwith itspurportedoffsetsandcompensationpaymentscandovery,very little toreducetheglobal total. Itwill,however,makegreat inroadsonAustralia’sproductivity, add layers of taxpayer-funded bureaucracy and paperwork, while exportingopportunitiestoothercountries.Theinvestment,jobsandskillsemigrationwillfollow.

IhavecommentedbeforeabouttheabilityofBeachtobuildcontinuallyonitsReservesandResourceposition,andFY11hascontinuedthistrendtoanevengreaterextent.BeachhasbookedasignificantResourceincreaseof96%ontheprioryear,primarilyduetothecompany’sfirstbookingfromitsunconventionalbasincentredgasplayintheNappamerriTroughoftheCooper Basin. This was accompanied by a Reserves increase of 17% on the prior year,primarilyduetocontinuedoilexplorationsuccessontheWesternFlankandthe infilldrillingprogramoftheSouthAustralianCooperBasinJointVenture.TheexpectationisthatReserveswillcontinuetogrowoverthecomingfinancialyearsasatheseprogramssuccessfullycontinue.

Beach has continued to focus on core underlying assets with a goal of divesting thoseinvestmentsandassetsconsiderednon-core. Asaresult, theCompanysold its interests inbothSundanceEnergyAustraliaLtdandRameliusResourcesLtd,generatingacombinedcashinflowof$35million,withthefundsused,andtobeusedtopartiallyfundBeach’senhancedexplorationanddevelopmentdrillingcampaignforFY12.Beachstill remainsa jointventureequitypartnerinthetwoproducingandprofitablewellsthatSundanceoperatesintheBakkenprovinceofNorthDakota,USA.Whilethesetwoinvestmentswerenotintendedtogeneratestrongreturnsinitially,astheyweremorestrategicinnature,theyhaveproventobeattractivelyprofitable.

Onthefinancialfront,Beachhascontinuedtodeliveraconsistentunderlyingnetprofitfigureof$41.4millionforFY11,anincreaseof7%onthepreviousfinancialyear,coupledwithaverystrongcashpositionof$173.3million.ThisfinancialperformancehascreatedafoundationfromwhichBeachanticipatesstronggrowth,whichisexpectedtobemainlydrivenby:unrestrictedaccesstopreviouslyfloodedareasoftheCooperBasinforbothexplorationanddevelopment;newpipelineinfrastructuretotheWesternFlankoiloperations;andinfilldrillingtodelivermoresalesgas.

“...Beach has continued to

deliver a consistent underlying net profit figure of

$41.4 million for FY11...”

CHAIRMAN’S REVIEW

“... significant Resource increase

of 96% on the prior year...”

Beach has continued its focus on sponsorship programs with a variety of communityorganisations.NewpartnershipshavebeenformedwiththeJulianBurtonBurnsTrust,whichcommencedwitha$210,000contributionovera threeyearperiodaswellasacontributionof $300,000 over three years to the Outback Gondwana Foundation and SouthAustralianMuseum.BeachcontinuestosupportorganisationssuchastheseastheysharesimilarculturalidealstoBeachandgivebacktolocalcommunitiesthroughavenuessuchaseducationandemployment.

During theyearwewerepleased thatBelindaRobinsonacceptedouroffer inMay tobeaNon-Executive Independent Director of the Company. Belinda brings with her a wealth ofexperienceas theoutgoingCEOof theAustralianAssociationofPetroleumExplorationandProduction(APPEA),thepeakindustrybodyforAustralia,andinherpreviousexecutiveroleswithGovernment.IwouldliketothanktheBoardforprovidinggreatsupporttomeoverthecourseoftheyear,inwhathasbeenachallengingonefrombothanoperationalandcorporateperspective.However,aspecialmentionneedstobemadeofBeach’sManagingDirector,RegNelson,whocontinuestoguideBeachtoaneverimprovingfinancialandoperationalposition,asaresultofhisintuitionandforesightandthesupporthereceivesfromhishighlycompetentManagementandstaff.

IoftenthinkaboutRegSprigg’svisionforthecompanyhefounded50yearsago,andIbelievethathewouldhavebeenincrediblyproudoftheBeachthatweareallapartoftoday.Intermsofthequalityofassets,cultureofsocialinclusion,communitysponsorshipsandenvironmentalstewardship,theCompanyinmyeyeshasfewpeers.IamproudtobetheChairmanofBeachandlookforwardtotheexcitingtimesahead.

Yourssincerely

BobKennedyChairman30August2011

“...continued its focus on sponsorship programs with a variety of community organisations.”

CHAIRMAN’S REVIEW

IhavebeensayingforsometimenowthattheCooperBasinisundergoingatransformationofpotentiallyepicproportions.Thattransformationis beginning to take shape.However,whatwethoughtmightpotentiallybeahugenaturalgasresourcenowshowssignsofbeingevenbiggerthanwehadimagined.

Beach recently booked a contingent resourceof 2 trillion cubic feet (equal to approximately330millionbarrelsofoil equivalent) for its firsttwobasin centredgas (BCG)wells,Holdfast-1and Encounter-1, within the large NappamerriTrough.ThetroughisoneofthemajorstructuralcomponentsoftheCooperBasinandithasbeenthesourceforthelargeaccumulationsofgasinfieldsnearMoomba,includingthelargeMoombaandBigLakefields.OuroriginalfocuswasonthepotentialofthethickandextensiveRoseneath-Epsilon-Murteree(REM)shalesectionwithinthetrough.Thewellsweredeliberatelydrilledawayfromanylargestructuralfeaturesthatmight naturally trap gas generatedwithin the trough,meaning that if they showed gassaturation throughout the shale section, therewould bea highdegreeof confidence that acontinuousandconsistentshalegasplayexists in theheartof theNappamerriTrough.Theresultswereoutstanding,intermsofprovinggassaturationthroughouttheshalesection,butalsoinreservoirsectionsaboveandbelow,totheextentthatwenowbelievethattheshalegasisnowjustonecomponentofamuchlargergasplay,whichwerefertoasaBCGaccumulation.

Weidentifiedtwoareaswherewebelievedthetargetzoneslikelytobethick,andoverpressured(apositiveattribute forgascontentandflow rates). Bothwellswereextensivelycoredandgeophysicallylogged.Acrucialfindingwasthatthetargetzonescontainednowater,butweregas saturated. Mineralogical tests indicated a high proportion of minerals that are likely toenhancethebrittlenessoftheshales(akeyanddesirableattributeforfracturestimulationintermsofextractinggastrappedinlowpermeabilityformations).Thewellswerenotdesignedasproductionwells,butdatagatheringwells:hence,highgasflowrateswerenotanticipated.ThekeyobjectivesforthetechnicalteamduringthisprocessweretoanalysethepropensityofvariousselectedintervalswithinandaboveandbelowtheREMpackagetofractureunderhydraulicpressure;totesttheefficacyofvariousfracturestimulationtechniques;tomeasuretheorientationofanyinducedfractures;andtomeasureanygasflowfromtheselectedintervals.Wesuccessfullycompletedahydraulicstimulationprocess,oversevenselected intervals inHoldfast-1,thatwashighlyexperimental.Agasflowofupto2millionstandardcubicfeetofgasperday(MMscfd)exceededallexpectations–averyexcitingoutcome.

MANAGING DIRECTOR’SReview

Rejuvenation of the Cooper Basin:

new oil discoveries and a Basin

Centred Gas play

Reg Nelson, Managing Director

Asaresultoftheworktodate,wehavenowtickedanumberofboxesonthepathrequiredtosuccessfullycommercialisethisBCGaccumulation.Thefirstwastoconfirmtheexistenceof gas, the second to test the propensity of the various target intervals to support inducedfracturingandthethirdwastogetthatgastoflowatratesthatwouldpointtoacommercialratewith properly designed productionwells. Wenow know this, and farmore. Wehaveestablishedthat,withappropriatestimulationtechniques,gasflowcanbeinducedatpromisingratesfrom,notonlyall thetargetREMsection,butalsothedeeperPatchawarraFormation.Wehaveproved fromcoresamples that theshallowerToolachieandDaralingieFormationsarealsogas-saturated.Verysignificantly,ourtargetzoneisnolongerthe350-400metreREMshale section, but a volumetricallymuch larger trough-centred zone thatmaybeup to onekilometerthick.

This is no longer just a shale gas play, but what we now call a BCG play, as these otherformations,consistingmainlyofsands,willlikelyalsobecorecontributorsofgas.

TheBCGaccumulation of theNappamerriTrough is potentially a game changing resourcefromnotonlyacompanyperspectivebutalsofromanindustryperspective.Beachremainsanindependentproducerintermsofgassupplyandthereforewillhaveoptionalityaroundtowhom,whenandwhereitsellsitsgas.

TwelvemonthsagotherewasnotasingleAustraliantransactionrelatingtoshalegas.However,thishasnowchanged.InthepastthreemonthswehaveseenConocoPhillipstakinganequitypositionintheCanningBasin,HessdoingthesameintheBeetalooBasinandmostrecentlyBGGroup (BG), throughQueenslandGasCorporation (QGC), buying intowildcat acreageborderingourQueenslandATP855Pacreage–thefirstinvestmentintheCooperBasinmadebyBG.OnemustalsorememberthatthesetypesoftransactionshavebeengoingonforsometimeintheUS,mostrecentlywiththe$14.1billionacquisitionofPetrohawkbyBHPBilliton(for3.9TCFofshalegasreserves).

So, finally there is some transactional momentum. There are also strong indications thatgaspricing isset to increase,asIhavenotedforsometimenow.Beachhasalreadybeenapproached by companies offering oil linked prices for conventional gas out of theCooperBasinforlargesupplyopportunities.ItisalsoourviewthattheeasternAustraliawillfindgastolikelybeshortinsupplyoverthecomingfinancialyearandmostlikelythefollowingyear,andthis isbefore the impactofgasexports throughLNGprojectscommences. It isnoteworthythatMorganStanleyrecentlyforecastgaspricesontheeastcoasttobeintherangeof$7-9/gigajoule(GJ)overthecomingyears,withothercommentatorsestimatingpricesaroundthe$8/GJmark.Beach,asoneofthefewindependent‘swing’producers,withtheabilitytosupplygasforboththedomesticmarketandtheexport-orientedLNGmarket,isalreadywell-positioned,butevenmoresoifthepotentialoftheNappamerriBCGcomestofruition.

One must also consider the future prospects of certain coal fired power stations such asHazelwoodandPortAugusta.WiththeproposedintroductionoftheCarbonTax,thesefacilitiesmaybeclosedorconvertedtocleanerburningnaturalgas,henceincreasingdemandforgasmolecules,placingevengreaterupwardpressureongasprices.Theonlyrealisticallyavailablealternatives for base load power in the absence of coal are natural gas or nuclear power.Naturalgasishereandnow.Itwillbetheonlyrealpracticalchoice,inmyview.

The gas landscape

MANAGING DIRECTOR’S REVIEW

WiththeCooperBasinunderwaterforatleasthalfofthefinancialyear,itisacredittoBeach’sproductionteamthatoilproductioncontinued,whetherbypipelineortruck,andacredittotheexplorationanddevelopmentteamfordeliveringonaprogramthatlookedinitiallyimpossibletoputinplace.ThefactthatanydrillingwasundertakenontheWesternFlankwasduetoatemporaryabatementoffloodwatersearlierintheyear,andateamthathadtheforesighttomovequicklyandconstructabridgeduringthistimetoallowasuppliesbasetobeconstructedandstockedwiththenecessaryitemsfortheforthcomingexplorationprogram.

Hadwenotconstructedthissuppliesdepot,theexplorationanddevelopmentprogramwouldhavegroundtoatrickleasfloodpulsesreturned,againcuttingtheWesternFlankofffromtheMoombasideoftheCooperBasin.

This program, commenced in FY11 and continuing in FY12, has delivered somewonderfulsuccess,withour initial targetof6millionbarrelsofoil (net tobeach) fromPEL91,PEL92andPEL104/111trackingaheadofprojectionstodate,withoutyethavingstarteddrillinginthetenementsacquiredfromtheImpressEnergytakeoverearlierthisyear.

In PEL 92 we had some early significant success during our development and appraisalcampaignandsomelatersuccessontheexplorationfront.PEL91hasdeliveredanumberofsuccessfulwells,themostpromisingofwhichappearstobetheBauer-1discovery,whichonearlyanalysis,isestimatedtocontainaround2millionbarrelsofrecoverableoil.ThismakesBauer-1oneof the largerWesternFlankoildiscoveries inacampaign thatalso resulted insuccessatPEL91’sHanson-1andSnellings-1andPEL92’sRincon-1andElliston-1.

WiththeBrentoilpricecontinuingtoremainat levelsabove$100/barrel,andtotaloperatingcostsofaround$25/barrel,theWesternFlankcontinuestobeanoutstandingcashgeneratingareafortheCompany.

Ourexposureto the international landscapehasbeencarefully thoughtout,with investmentonlymade in those countries and areas thatManagement believe offer the best andmostmateriallysignificantopportunitiesforBeachtogrowandfilloutitsproductionprofile.OurearlymoveaheadofthepackinTanzaniahasbeenjustifiedwiththerecentgazettaloftheNorthernBlockofLakeTanganyika,whichwasawardedtoFrenchoilgiantTotalS.A.Whileweweredisappointedtobeacloserunnerupinthebidprocess,havingaglobalmajorsuchasTotalwiththecredentialsandbalancesheettohelpunlockthepotentialofLakeTanganyikashouldhavemanypositiveramificationsforBeach.WhenBeachbid,afewyearsago,fortheSouthernBlockofLakeTanganyika, thebiddingwasnotascompetitiveas that seen in theNorthernBlock. Again, thisshows thatBeachdoes thinkwellaheadof thepack. WithanextensiveseismicsurveyplannedtowardtheendofthiscalendaryearoverregionsidentifiedbyairborneaeromagneticandgravitysurveyswithintheSouthernBlock,weareconfidentofsomeexcitingtargetsbeingidentified.

Western Flank oil, a continuing

success story

International success on the

horizon


InEgypt, ithasbeenaveryturbulentyearforthecountrywiththe‘People’sRevolution’andsubsequentoverthrowofitsPresident,HosniMubarak.Operationaldisruptionswerehoweveronlyminorandwehave justcompleted thedrillingofourfirst twowells in theAbuSennanConcession,GPZZ-4andAlAhmadi-1. We recentlyannounced these twowellshavebothbeendiscoveriesandlookforwardtoevaluatingtheresultsofflowtestingprogramsunderwayat each location. These are very encouraging results fromour first foray into theWesternDesertanditisjustrewardforthosewhohavemaintainedtheirfocusandbeliefintheexcellentopportunitiesandassetswehaveinEgypt.

Beachhasbeeninvolvedforsometimeinaspectsofrenewablesourcesofenergythatfititsskillsandcapabilities.AMemorandumofUnderstanding(MOU)withGeneralAtomicsofCaliforniaseekstousecarbondioxidetogrowalgaeforbiodieselproductionintheCooperregion;aMOUwithRentechCorporationistoexaminethepotentialforfertilizerproduction-essentialforfoodproduction–aswellastodevelopprojectstoconvertnaturalgasintoliquidfuels,particularlyhighly sought-after jet fuels; and Beach hasmanaged the Paralana Geothermal Project inthe north ofSouthAustralia, including the drilling of a 4,000metrewell that has nowbeensuccessfullyhydraulicallystimulated.ItisworthnotingthatthesameequipmentandservicesthatwereusedtostimulatetheHoldfast-1wellwereusedinourParalana-2geothermalwell.IwouldgoasfarastosaythatthegeothermalindustryinAustraliawillbeheavilyreliantontechniquesdevelopedinthenaturalgasindustryasitevolves,particularlythroughoureffortsandknowledgegainedinourBCGplay.

Insummary,IfeelthattheCompanycouldnotbebetterpositionedforarealstepchangeasaresultofthesignificantopportunitiesithaswithinitsportfolioofassets.TheseopportunitiesaresupportedbystrongcashflowgeneratingassetsintheCooperBasin,whichshouldonlyincreaseaspipeline infrastructure improvesoilandgasproductionandfloodwaters recedeto provide access for new exploration campaigns. Our objective of completing a pipelinewithacapacityof15,000barrelsperdaywithinthenexttwelvemonthsindicatesourviewofthepotentialdeliverabilityofWesternFlankproductionassets. Idoverymuchbelieve thatFY12willbeawatershedyearfortheCompanywithsomuchgoingonbothcorporatelyandoperationally.MydeepestthanksgotothestaffatBeach,whocontinuetoworktirelesslytomakethecompanywhatitistoday.ThanksalsotomyBoard,whohaveprovidedthenecessaryguidanceandsupporttoensurethatBeachcontinuestothriveinchallengingbutexcitingtimes.AndtotheshareholdersoftheCompany,IgivemygratefulthanksandmystrongbeliefthatBeach’s50thyearwillbeayearoffundamentalchangeandgrowth.

Yourssincerely

RegNelsonManagingDirector30August2011

Sustainability options recognised


FINANCIALReview

Oil and gas sales revenue

Beach’stotalrevenuefortheyearended30June2011increasedby2%to$498millionfrom$489millioninthepreviouscorrespondingfinancialyear.

Salesrevenuewasup2%from$487millionto$496millionduetohigherpricespartlyoffsetbyunfavourableforeigncurrencymovementsandlowervolumes.Salesrevenuefromproductionwas$6millionhigherwithhigher3rdpartysalescontributingafurther$3million.The lowervolumessoldrelateprimarilytolowerproductionwiththecontinuedimpactoftheCooperBasinfloodsfortheentire12monthperiod,theunavailabilityoftheTantanna-Moombaoilpipelineinthelatterpartofthereportingperiod,thesuspensionoftheoffshoreBMGliquidsproductionoperation,aswellastheeffectsofnaturalfielddeclineandthetimingofshipments.

TheUSoilpriceincreasedstronglyduringtheyear,upfromanaverageofUS$77/bbltoUS$95/bblalthoughthiswaspartiallyoffsetbyacorresponding increase intheAUDexchangeratefromanaverageofUS$0.88toUS$0.99containingtheresultingaveragerealisedoilpricetoAUD$97/bblcomparedtoAUD$87/bblinthepreviouscorrespondingperiod.

Asshowninthechartbelow,whilstanincreaseintheUS$oilpricehasimprovedtheoilandgassalesrevenueforFY11,ithasbeenclearlyoffsetbyacorrespondingincreaseintheexchangerateandadecreaseintotalsalesvolumes.

12 months to JuneA$000’s 2011 2010 Variance %

Sales RevenueGasandGasLiquids 196,194 195,857 337 0.2%

Oil 220,366 215,105 5,261 2.4%

Sales Revenue Produced 416,560 410,962 5,598 1.4%ThirdPartySales 79,886 76,506 3,380 4.4%

Sales Revenue Total 496,446 487,468 8,978 1.8%

Liquids Prices

Gas/ethane Prices

Third Party Purchases Volume / Mix

FX Rates

$487.5

$65.7 $5.8 $3.4

$496.4

$31.1 $34.9

300

400

500

600

$m

Sales Revenue Comparison

AUD/USD2010 $0.88 2011 $0.99

A$/GJ2010 $5.042011 $5.35

US$/boe2010 $772011 $95

June 10 June 110

100

200

Average PriceA$52.21/boe

Average PriceA$56.28/boe

$8.9 milliontotal increase

Other Income

OtherincomeforFY11wasdownsignificantlyfromthepreviousfinancialyear,downfrom$59millionto$26millionasaresultofpreviouslyrecognisingadditionalcontingentpaymentsonthesaleoftheTiptonWestassetsof$43million.ThisfinancialyearhasseentherecognitionofgainsontherevaluationandthefullandpartialsalesrespectivelyoftheGroup’sshareholdingsinRameliusResourcesLtd($17million)andSundanceEnergyAustraliaLtd($7million).

Earnings

Grossoperatingprofitimprovedby6%duetoreducedlossesfromBMGastheprojectmovedtoanon-productionphaseaswellashigherprices.Thiswaspartlyoffsetbyhighercostsonournon-managedoperationsduetofloodingintheCooperBasinandincreasedmaintenancecostswhichcut theGroup’ssavings incashproductioncoststo$6million.Higher3rdpartypurchasesandsalesfrominventoryledtoincreasedsalesrevenueseventhoughsalevolumesfromproductionweredown.

Depreciation

Sales revenue

Cash production

costs

3rd party purchases

Inventory$72.8

$12.5 $8.9

$6.3

$77.3

$7.1 $16.1

60

80

100

120

$m

Gross profit comparison

June 10 June 110

20

40


FINANCIAL REVIEW

Hedging/Foreign Exchange

InthisfinancialyearBeach,recordedhedgingandforeignexchangelossesof$4.3millionascomparedtoa$9.4millionlossinthepreviousfinancialperiod.

Thelossinthisperiodwasduemainlytoadditional lossesonthecurrencytranslationofanaverageofUS$currencyaccountsduetothesignificantriseintheAUD/US$exchangerate-upfromUS$0.88toUS$0.99,andthemarktomarketeffectonoilhedgingpartiallyoffsetbyreceiptsfromcurrencyhedgingthroughouttheyear.

Detailsofthehedgingpositionasat30June2011isshownbelow:

Oil Hedged At

PeriodFloor A$50/bbl

BRENTFloor A$55/bbl

BRENTFloor A$55/bbl

BRENTTotal Hedged

Volumes (bbls)

2011/2012 360,000 630,000 600,000 1,590,000

2012/2013 315,000 315,000

Total 360,000 630,000 915,000 1,905,000

Net profit / (loss) after tax (“NPAT”) adjusted for comparison with the full year results from the previous period (Underlying Profit)

Thenetprofit/(loss)afterincometax(“NPAT”)forthefinancialended30June2011wasa$97.5million loss as compared to $33.1million profit for the previous corresponding period, duemainlytolargeimpairmentchargeontheBMGprojectandthecostsofmovingtheprojecttoanon-productionphase.

Byadjustingthefullyearprofit/(loss)toexclude:

● unrealisedhedging;

● the gain on the revaluation and sale of investments in Ramelius Resources Ltd andSundanceEnergyAustraliaLtd;

● theimpairmentofassetsmainlyrelatingtoBMGaswellasthecostsofmovingtheprojecttoanon-productionphaseandthesettlementofalegalclaim;

● thegainandtakeovercostsontheacquisitionofImpressEnergyLimited;and

● therelevanttaxadjustments,

asperthetableonthefollowingpage,hasresultedinanunderlyingprofitof$41million,beinga7%improvementontheunderlyingprofitfromthepreviousyear.

FINANCIAL REVIEW

Comparison of Underlying Profit June 11 June 10Movement from PCP

Net (loss) / profit after tax $’000 (97,450) 33,118 (130,568)Removeunrealisedhedging(gains)/losses $’000 (1,583) 4,681 (6,264)

Removerevaluationofassets $’000 (13,568) 1,226 (14,794)

Removeassetsales $’000 (10,748) (54,846) 44,098

Removeimpairmentofassets $’000 157,940 63,858 94,082

Removelegalsettlement $’000 12,796 – 12,796

RemoveBMGNPP $’000 29,629 – 29,629

Removegainonacquisitionofsubsidiary $’000 (1,143) (3,868) 2,725

Removetakeovercosts $’000 1,500 – 1,500

Taximpactofabovechanges $’000 (52,447) (5,496) (46,951)

Removetaxbenefitfromconsolidationofsubsidiary $’000 (10,405) – (10,405)

RemoveimpactofPRRTadjustment $’000 26,909 – 26,909

Underlying Net Profit After Tax $’000 41,430 38,673 2,757

Net profit / (loss) after tax (“NPAT”) adjusted for comparison with the full year results from the previous period (Underlying Profit) - continued

Gross profit

Net financingcosts

Other expenses and revenue

Tax$38.7

$4.5 $2.7 $0.8

$41.4

$5.3

25

30

35

40

45

50

$m

Underlying net profit after tax comparison

June 10 June 110

5

10

15

20


FINANCIAL REVIEW

Assets

Total assets have reducedby$89million to $1,588millionduring the financial year ending30June2011.

Cash balances increased by $3 million to $173 million. Operating cash flows were higherfollowingthelargetaxpaymentinthepreviousyearontheTiptonWestassetsale.InvestingcashoutflowswerealsohigherduetotheacquisitionsofImpressEnergyLtdandexplorationinterestsinEgyptduringtheyear.

Trade and other receivables have decreased by $62 million mainly due to the receipt of$43millionincontingentproceedsonthesaleoftheTiptonWestwhichwasrecognisedinthepreviousyearaswellaslowersalesaccrualsduetothetimingofshipments.

Inventoriesweredownby$24millionduetosaleofremainingcrudefromtheJackson-Mooniecrudeoilpipelineaswellaslowerethaneinventories.

Fixedassets,developmentandexplorationincreasedby$10millionduetocapitalexpenditureof$165millionandacquisitionsofImpressEnergyLtdandinEgyptof$105million.Thiswaslargelyoffsetbyimpairmentof$159million,primarilyonBMG,aswellasnon-cashdepreciationandamortisationexpenseof$102million.

Liabilities

Totalliabilitiesincreasedby$10millionto$315millionduringtheperiod.

Derivativeliabilitieswerereducedby$4millionduemainlytothereductionintheinterestrateswapforpaymentsmade.

Tradeandotherpayablesincreased$28millionprimarilyduetohigherjointventurecreditorsandadditionalcostsaccruedfortheBMGprojectasitmovestoanon-productionphase.

Taxliabilitiesdecreasedby$20millionmainlyduetotheincreaseinthetaxbaseofinventories.

Provisionshaveincreasedby$6millionduetoanincreaseintherestorationprovision.

Equity

Equityhasdecreasedby$99millionprimarilyduetothenetlossaftertaxof$97millionanddividendpaymentsmadeof$19million for theyearended30June2011partlyoffsetbyanincreaseinissuedcapitalof$8millionfromthedividendreinvestmentplan,sharesissuedtothenon-controllinginterestsofSomertonEnergyaswellasminormovementsinreservesandothercomprehensiveincome.

Dividends

DuringthefinancialyeartheCompanypaidapartiallyfrankedfinaldividendpaymentof1.00centspersharebasedon theFY10finalfinancial resultsaswellasan interim fully frankeddividendof0.75centspersharebasedonthe2010/11halfyearresults.TheCompanywillalsopayafullyfranked1.00centpersharefinaldividend.

FINANCIAL REVIEW

REVIEW OFOperations

Overview

Beach completed a very active year operationally, addressing a broad range of conventional and unconventional opportunities in Australia and internationally. This was again achieved despite a difficult year of continued severe flooding and localised rain events in our Cooper Basin tenements. Beach achieved annual production of 6.6 MMboe during FY11 with operated assets on the Western Flank of the Cooper Basin exceeding production expectations despite no access to the Tantanna to Moomba pipeline (operated by Santos on behalf of the South Australian Cooper Basin (SACB) Joint Venture) later in the year due to required maintenance. Reserve replacement and reassessment activities significantly increased Beach’s Proved and Probable reserve position at 30 June 2011 to 77.4 MMboe, an increase of 11.2 MMboe over FY10 year end reserves of 66.2 MMboe.

Beach participated in a total of 39 wells during FY11 in Australia, Egypt and the USA. Drilling success rates were above average when compared with results over the ten year period since 2001, with a success rate of 54% for exploration and 65% for exploration and appraisal combined.

The drilling program included three wells targeting resources outside of conventional oil and gas exploration. Holdfast-1 and Encounter-1 in South Australia targeted Cooper Basin shale gas potential and Henderson 4-26/35H, targeted oil in the Bakken Shale Play in North Dakota, USA. The significant success of all three wells, the successful flow test of gas from Holdfast-1 and subsequent production from Henderson 4-26/35H, continues our transition to an energy company with assets and agreements covering a wide range of energy supply possibilities in Australia and internationally. The significant gas potential in the Cooper Basin, Permian aged Nappamerri Trough shales and sands in PEL 218 (Beach 90%), highlighted by the 2 TCF contingent gas resource booking for the permit, will be further evaluated in FY12 as part of a very significant and high potential forward program for the Company.

Looking ahead to FY12, the following key projects will be underway:

● A drilling program, including both vertical delineation wells and pilot horizontal wells in PEL 218 and ATP 855P to target and appraise the gas potential of the central Nappamerri Trough strata.

● A significant oil exploration, appraisal and development drilling campaign of up to 26 wells planned for the Western Flank of the Cooper Basin.

● Commencement of 2D seismic acquisition in our Lake Tanganyika South Concession in Tanzania.

● Further exploration drilling in both the Western Desert and Gulf of Suez regions in Egypt.

These projects and other planned activities highlighted in the report, combined with increased access in the Cooper Basin due to the abatement of flooding, will lead to a very operationally active and exciting FY12, with the potential for Beach to participate in the drilling of over 100 wells during the year.

REVIEW OF OPERATIONS

AreaNet Production

FY11 FY10

Oil (MMbbl) Cooper & Eromanga Basins 2.0 2.3

Gippsland Basin 0.1 0.3

United States 0.03 n/a

Total Oil 2.1 2.6

Sales Gas & Ethane (PJ) Cooper & Eromanga Basins 22.0 23.1

LPG (kt) Cooper & Eromanga Basins 42.2 45.8

Condensate (MMboe) Cooper & Eromanga Basins 0.3 0.3

Total Oil & Gas (MMboe) 6.6 7.3

Note: South Australian Cooper Basin non operated numbers are preliminary

Production

Beach produces oil, gas and gas liquids from numerous production joint ventures within the Cooper and Eromanga Basins.

Beach’s production during FY11 was 6.6 MMboe, with 6.5 MMboe produced from the Cooper Basin. Production comprised oil and gas liquids of 7,636 boepd (42% of total) with gas production of 10,394 boepd. The drop in production from the previous year was primarily due to the continued impact of the Cooper Basin floods for the entire 12 month period, the unavailability of the Tantanna-Moomba oil pipeline in the latter part of the reporting period, the suspension of the offshore BMG liquids production operation, as well as the effects of natural field decline.

Oil

Cooper/Eromanga Basins

Oil production within the Cooper/Eromanga Basins reduced 13% on the previous year with reductions across all assets.

In recent years, field discoveries and subsequent development activities on the Beach operated Western Flank of the basin have continued to offset natural decline in production rates. The continuation of the significant flooding event seen in 2010, which subsequently peaked, again in June 2011, denied access until a bridge over the Cooper Creek was installed in December 2010. This enabled Beach to establish a fuel/water storage facility and other resources required to initiate a two rig drilling campaign on the Western Flank independent of flood access issues. Bridge access was cut in June 2011 for an anticipated 2-3 months period. Importantly production is expected to see a significant boost in 2012 following the significant success rate achieved by this two rig program.


FY11 production from these assets was down 15% due to the failure of the SACB Joint Venture pipeline infrastructure (Tantanna to Moomba oil pipeline) in April which the Beach operated pipeline connects into. The installation three years ago of a Beach flow-line across the normally dry Cooper Creek, has enabled consistency of production and the ability to truck crude following the SACB infrastructure failure. The SACB Joint Venture has commenced work on returning the pipeline to operation.

The decline in production within Beach’s non-operated assets is due to natural decline and the restriction in appraisal and development activity associated with the flood events. Down time was also high in areas reliant on trucking, due to the significant flood event.

Gippsland Basin

Production of oil from the Basker and Manta Fields (Beach 30%) was curtailed as the operation was suspended and went into a non-productive phase in September 2010. The Basker Spirit FSO was released with the Crystal Ocean FPSO utilised to support integrity testing of wells in preparation for the non-productive phase.

Gas


Production of gas and gas liquids from the Delhi assets declined 6% from 4.7 MMboe in FY10 to 4.4 MMboe in FY11 due to the combined impacts of the Cooper Basin flooding, as well as natural field decline. The impact on gas sales volumes has been minimal due to the withdrawal of storage gas available for use in such situations.

Reserves

Beach’s Proved and Probable hydrocarbon reserves as at 30 June 2011 were increased by 11 MMboe to 77 MMboe despite production of 6.6 MMboe.

This result reflects a successful reserves growth strategy:

● Oil reserve additions in the Cooper Basin of 1.8 MMbbl through exploration success and better than anticipated production performance.

● Gas and gas liquid reserve increases in Cooper Basin of 6.9 MMboe including infill drilling results and resource to reserve conversions of 3.7 MMboe.

● Addition of 1.9 MMbbl of oil reserves arising from acquisition of Impress Energy.

● A reduction in BMG oil reserves by 0.8 MMbbl to 0.0 MMbbl, 0.1 MMbbl due to production and 0.7 MMbbl due to entering a non-productive period.

● An increase to Egypt reserves of 1.0 MMbbl due to new plans to develop the Burtocal Oilfield (North Shadwan, Beach 20%).

Area

Contingent Resources (Most Likely or 2C) 30 June 2011

Oil (MMbbl)

Gas Liquids (MMboe)

Gas (PJ)

Oil Equivalent (MMboe)

Cooper Basin - Conventional

5.6 19.6 377 90

Cooper Basin - Unconventional

– 3.8 2,642 458

Other Resources 9.4 3.3 127 34

Total 15.0 26.6 3,145 582


AreaProved and Probable Reserves 30 June 2011

Oil (MMbbl)

Gas Liquids (MMboe)

Gas (PJ)

Oil Equivalent (MMboe)

Cooper & Eromanga Basins

17.0 9.5 275 73.8

Gippsland – – – –

United States 0.3 – – 0.3

Egypt 3.3 – – 3.3

Total 20.6 9.5 275 77.4

Date Proved and Probable Reserves (MMboe)

30 June 2002 3.830 June 2003 4.530 June 2004 4.330 June 2005 10.830 June 2006 36.230 June 2007 89.630 June 2008 14530 June 2009 6630 June 2010 6630 June 2011 77

Contingent Resources

Beach has Contingent Resources totalling 582 MMboe, see table below.


Cooper Basin conventional resources relate to hydrocarbons contained within existing conventional gas reservoirs that are potentially economically recoverable through improvements in gas price or reduction in development cost. These resources relate to a review of four of the largest fields and are primarily associated with increasing recovery through the improved application of existing development technology. Quantification of the improved recovery potential outside the four major fields has not yet been undertaken.

Cooper Basin unconventional resources include hydrocarbons contained within existing unconventional gas reservoirs, such as shale, coal and/or low permeability sandstone within the Roseneath, Epsilon, Murteree and Patchawarra Formations of the Moomba and Big Lake Fields. These resources are being targeted by the SACB Joint Venture with ongoing technical work.

During the financial year, Beach drilled two wells to address unconventional contingent resources. Holdfast-1 and Encounter-1 were drilled outside structural closure in the Nappamerri Trough within PEL 218. Both proved a fully gas saturated sequence in the Toolachee, Daralingie, Epsilon and Patchawarra formations plus the Roseneath and Murteree shales. Holdfast-1 was completed and seven flow stimulations conducted. Subsequent to year end, testing demonstrated a flow rate of up to 2 MMcfd. Beach has made an initial gross contingent resource booking in PEL 218 of 2 TCF of sales gas (1.8 TCF net to Beach) as a result of the work completed thus far. Further details of this project are provided in the Exploration and Development section of the report.

Other resources are primarily associated with the expanded Basker Manta Gummy Oil and Gas development, but also include Beach’s share of resources in the Papuan, Carnarvon, Otway and Canterbury Basins.

Exploration & Development


Beach holds widespread interests in the Cooper and Eromanga Basins of South Australia and Queensland. During the year Beach enhanced its acreage position in the Basins with the acquisition of Impress Energy and also participated in the drilling of 37 wells in the region despite continuation of the flooding event which caused access disruption throughout FY10. Western Flank drilling operations, which commenced in February 2011, continued after the arrival of a second flood pulse during the third quarter of 2011, due to the completion of a remote logistics and supply base on the western side of the Cooper Creek.

Key results of the FY11 program were:

● Shale gas exploration in PEL 218 (Beach 90%) commenced with the drilling of Enounter-1 and Holdfast-1. Results exceeded expectations and combined with the subsequent year end flow testing of Holdfast-1 yielding gas rates up to 2 MMcfd, indicated the substantial potential of the Permian section for future gas production from shales and other lithologies over the entire permit.

● Oil discoveries in PEL 91 (Beach 40%) at Hanson-1 and Snellings-1 plus a successful appraisal and development drilling program at the Parsons and Butlers Oilfields in PEL 92 (Beach 75%) continued to highlight the prolific potential of the Western Flank play fairway.


● Beach operated production on the Western Flank performed above expectations and flood mitigation activities, including the construction of the Kudnarri Bridge over the Cooper Creek and completion of the Gunyah remote logistics base, allowed activities to continue on the Western Flank unimpeded by floodwaters.

● A five well oil appraisal and development program in the Cook Field in PL 97 (Beach 20%) yielded a 100% success, increasing the size of the field. Based on the positive results, a further drilling campaign is being planned for FY12.

● Two oil discoveries, Watson West-1 and Irtalie East-1, were made in PL 35 (Beach 38.5%) in the Queensland portion of the Cooper/Eromanga Basins.

PEL 91 (Beach 40%)

A five well exploration drilling program, of which the first three were drilled or commenced in FY11, has been undertaken in the permit.

The first of these wells, Hanson-1 made a new field, Namur Sandstone oil discovery. Oil shows in the Birkhead Formation were drill-stem tested (DST), however commercial hydrocarbons were not recovered from this Formation. It is expected that Hanson-1 will be connected in the second half of 2011. The second well, Snellings-1, was also a new field oil discovery in the Namur Sandstone. A DST of the uppermost Namur Sandstone recovered 31.5 barrels of oil during a two hour flow period, with the well cased and suspended as a future producer. Beach assessed that the two discoveries added 0.76 MMbbl of oil to Beach reserves.

The third well in the program, Arno-1, encountered oil in the Namur Sandstone and Birkhead Formation, but the results were assessed by Beach to indicate the accumulations are sub-economic and therefore Beach did not participate in casing the well.

Subsequent to year end, the fourth well in the program, Bauer-1, encountered a gross oil column of 15 metres, with thirteen metres of net oil pay in the McKinlay/Namur Sandstone interval. A preliminary volumetric assessment indicates the structure could hold in the order of 2 million barrels of recoverable oil (0.8 million barrels net to Beach).

The commencement of the 432km2 Aquillus 3D seismic survey and the 252km Undatus 2D seismic survey are expected in the third quarter of 2011, with the 3D survey area to be modified based on accessibility. Both surveys are designed to assess future exploration drilling opportunities for Namur Sandstone and Birkhead Formation oil accumulations.

The prospectivity for making significant oil discoveries in PEL 91 has been confirmed by the recent drilling successes and funding for a further two exploration wells and further seismic acquisition to be undertaken during FY12 has been approved by the PEL 91 Joint Venture. Development drilling on the recent PEL 91 discoveries is also being considered by the Joint Venture and is likely to be commenced during FY12.


Edg

i

e of se

C ao r

t

ope B in Sed m n s

S.A.

Vic.

Tas.

W.A.

N.T.Qld

N.S.W.

PEL 111

PEL 424

PEL 187

PEL 104

NaccowlahBlock

Total 66Block

WareenaBlock

Aquitaine CBlock

Aquitaine ABlock

AlkinaBlock

FFA

Aquitaine BBlock

InnaminckaBlock

0 100

KILOMETRES

Inland

Talgeberry

Gas to Mt Isa

Gas toBrisbane

Gas to Adelaide Gas to Sydney

Oil toMoomba

Liquids to Port Bonython

Tintaburra

Gidgealpa

CookJames

Keleary

N. S. W.

SOUTH

AUSTRALIA

Tirrawarra

PEL 94 PEL 95

COOPER BASIN

ATP 633P

PEL 107

PEL 91

PEL 92

ATP 269P

ATP 269P

THYLUNGRA

20110805 CE11-0082

PEL 90Candra

Block

PERMIT LOCATION MAP

COOPER BASIN

Moomba

QUEENSLAND

PEL106B

PEL 218

50/40/10

ATP 855P

CHRISTIES /

SELLICKS

KIANA

ALDINGA

BLACK STUMP

KENMORE

BODALLA SOUTH

BARGIE

GLENVALE/COOLUM

CALLAWONGA

SILVER SANDS

PARSONSPERLUBIE /PERLUBIE STH

CANUNDA /UDACHA /BROWNLOW /MIDDLETON

BUTLERS

CHITON

Beach Interest

Oil Field/Pipeline

Gas Field/Pipeline

Beach Operated

Beach Production Licence

PEL 92 (Beach 75%)

Following a hiatus in drilling activity of a year and a half on the Western Flank due to the effects of flooding, Beach recommenced operations in March 2011 by starting a development, appraisal and exploration campaign in PEL 92 (Beach 75%) and PPL 224 (Beach 75%).

The development and appraisal activity delivered 100% success at the Parsons-3 and Parsons-4 wells (in the March quarter), and Parsons-5, Butlers-2 and Butlers-3 wells (in the June quarter). All were cased and suspended as future oil producers. Preliminary assessment indicates that the Butlers and Parsons drilling program has added gross oil reserves of more than 1.4 MMbbl (1.05 MMbbl net to Beach).

The Butlers oil production facility is planned for installation and commissioning by the end of September 2011.


The PEL 92 Western Flank exploration campaign was slightly modified from that initially planned, due to access issues associated with flooding. It focussed on prospects west of known discoveries and hence more distant from the hydrocarbon source kitchen. The first four wells of the campaign, Parham-1, Stenhouse-1, Turton-1 and Westall-1 did not encounter any significant hydrocarbons and were plugged and abandoned. These first four wells were specifically aimed at testing areas to the west of discovered oil in the permit prior to partial relinquishment in November 2012. Subsequent to the reporting period, this relinquishment date was extended until November 2013.

Post the reporting period, the exploration campaign has continued and following a further plugged and abandoned well at Wheatons-1, yielded back to back successes at Rincon-1 and Elliston-1.

The PEL 92 Joint Venture has approved the work program and budget for an aggressive exploration campaign for the twelve month period to June 2012. The program includes nine exploration wells and both 3D and 2D seismic.

The nine exploration wells will focus largely on prospectivity in the primary productive reservoir of the permit, the Namur Sandstone. Of the nine wells, as noted above, three have already been drilled (Wheatons-1, Rincon-1 and Elliston-1). A further three of the nine are Namur exploration locations that have already been agreed and funding allocated by the Joint Venture. The remaining three exploration locations will be confirmed in due course following early drilling results from the program and interpretation of the proposed seismic program. These wells will likely include tests of other play types.

In FY12 approximately 200km2 of 3D seismic will be acquired in the Rincon discovery area of PEL 92, immediately to the west of the PEL 91 Joint Venture discoveries at Chiton, Hanson and Snellings. The 2D program will be acquired in the eastern portion of the permit, to infill the currently sparse 2D grid.

The work program and budget as approved represents a capital investment of over $24 million and is expected to increment a gross risked mean reserve in the order of 1.8 MMbbl (1.35MMbbl net to Beach).

In addition to the exploration program, up to seven development wells have been budgeted across the Butlers, Perlubie and Christies Fields.

PEL 106 - Beach Farmin Block (Beach 50%)

Extended production testing of the Brownlow and Canunda gas discoveries has been completed and Beach has commenced a project to commercialise the PEL 106 gas discoveries. This will initially involve producing the Middleton and Brownlow Fields into SACB infrastructure. The project will utilise new Fiberspar flexible pipe technology. This pipe can be installed far more quickly and has a much lower cost for purchase and installation than traditional steel pipe. The commissioning of this development is expected towards the end of 2011 and is subject to finalisation of commercial terms. Further exploration and appraisal drilling is planned for FY12 with the expectation of expanding the development to accommodate an increased reserve base.


ATP 633P (Beach 50%)

Santos has earned 50% equity in ATP 633P by contributing towards the cost of the 285km2 Acavus 3D seismic survey. The new joint venture has recently approved a budget for FY12 which includes drilling of two exploration wells and acquisition of 320km 2D seismic.

PEL 218 (Beach 90%)

Two vertical shale gas exploration wells, Encounter-1 and Holdfast-1, were drilled by the Permian Joint Venture during the reporting period. The wells were extensively cored and analysed for properties relating to the gas content of the target section and the mechanical properties of the rock with respect to planning fracture stimulation.

The exploration objectives were met, as the presence and thickness of the target Roseneath-Epsilon-Murteree (REM) section was confirmed and the section was demonstrated to be gas saturated throughout. Drilling was continued below the target REM section in both wells to penetrate the uppermost section of the Patchawarra Formation, which was also proven to be gas saturated. The Toolachee and Daralingie Formations, immediately above the REM section will also be further analysed in future wells, as like the Patchawarra, it has proven to be gas saturated outside of structural closure at these locations. Approximately 700 metres of gas saturated section was encountered in both wells, highlighting the significant potential of the area.

Subsequent to year end, the REM section and the Patchawarra Formation in Holdfast-1 well have been hydraulically stimulated over seven stages and the combined interval flow tested above expectations at up to 2 MMcfd. Production logging demonstrated gas flow from each of the sections of the REM as well as the Patchawarra Formation. Further operations and production logging will be carried out to quantify the proportional flow from the stimulated zones. It is also anticipated that stimulation and flow testing of Encounter-1 will be undertaken prior to the end of 2011.

As a consequence of the results thus far, Beach has made an initial gross contingent resource booking of 2 TCF of sales gas (1.8 TCF net to Beach). While PEL 218 is approximately 1600km2 in size, this resource has been constrained to areas of 100km2 around each of the evaluation wells. The booking takes into account the main shale and mixed lithology REM target zones and the uppermost Patchawarra Formation, but does not include the significant upside potential in the, as yet, untested deeper sections of the Patchawarra Formation and the shallower Toolachee and Daralingie formations.

Tiltmeter monitoring at the surface demonstrated that the fracturing was predominantly vertical, likely favouring horizontal production wells. Pilot horizontal production wells are therefore planned for drilling near to both the Encounter-1 and Holdfast-1 wells in 2012 in addition to the drilling of further vertical delineation wells. The forward program is designed to test the significant potential seen in what is now considered a thick, continuous, multi lithology gas accumulation across the permit.

No operational activity was undertaken by the Post Permian Joint Venture. It was however agreed that the Phase 2 farmin obligations could be considered completed and the farminees (Icon Energy, Deka and Well Traced) are therefore entitled to an assignment of the Phase 2 interests. Following approval of this assignment, Beach will hold 23.33% of the Post Permian Joint Venture. Beach will retain its 90% interest in the Permian Joint Venture and operatorship of both the Permian and Post Permian Joint Ventures.


ATP 855P (Beach 40%)

Following resolution of a dispute with Icon Energy Ltd (Icon) in relation to ATP 855P, Beach and Icon have agreed to work together under the terms of a Farmin Agreement, pursuant to which Beach has been assigned a 40% interest in the ATP 855P tenement. The terms of the Farmin Agreement are such that Beach will fund, less a small contribution by Icon, Icon’s share and Beach’s share of a pilot horizontal shale gas well to be drilled prior to June 2012. The Joint Venture is also planning a 300km 2D seismic survey. It is expected that a similar exploration and appraisal program to that currently underway in PEL 218 would be followed in this permit to address the significant multi lithology gas potential of the Nappamerri Trough extension into southwest Queensland.

Santos Operated Areas

During FY11, Beach participated in 22 wells in the Cooper/Eromanga Basins in tenements operated by Santos Ltd, with an overall success rate of 95%. Fourteen of these wells were gas development wells and the remaining eight, including three exploration wells, addressed oil targets.

The oil exploration program resulted in two discoveries (Watson West-1, Beach 38.5% and Irtalie East, Beach 38.5%) near the southern margin of the Cooper Basin in Queensland. The wells have been cased for future production.

Five oil appraisal and development wells were drilled on the Cook Field (Beach 20%) located approximately 200 km to the northeast of Moomba in Southwest Queensland. All five wells were successful and two of the wells came in high to prognosis potentially increasing the reserve estimate for the field.

The gas program involved the drilling of fourteen development wells, all of which were successful and cased for production.

Gippsland Basin

BMG Project (Beach 30%)

During FY11 the BMG Project entered a non-productive phase whereby hydrocarbon production from the fields was suspended. Field operations were carried out to ensure that the field was suspended appropriately for this phase. The BMG Joint Venture is currently evaluating possibilities for a phase of gas and liquids production as well as re-evaluating all exploration and appraisal options in the vicinity of the fields.

PRL 2 (Beach earning up to 50%)

PRL 2 is a retention lease in the onshore Gippsland Basin, eastern Victoria containing the Wombat tight gas accumulation. In March 2010, Beach reached an agreement with Lakes Oil NL, under which Beach can pay up to $6.7 million to operations in the permit to earn up to a 10% interest. Beach has the option of increasing its equity up to 33.3% by contributing up to a further $26.6 million to operations in the permit.

Farmin works commenced in December 2010 with an extended flow and pressure build-up test of a single zone in the Wombat-2 well. The well was flowed for 12 days through a 1” choke at an average rate of approximately 0.8 MMcfd before being shut-in for a four week build-up. The results of the Wombat-2 test have been used to assist in the design of a reservoir stimulation program for Wombat-4, scheduled for the fourth quarter of 2011. Options for a second reservoir stimulation project at Boundary Creek-2 are also under review.


Egypt

North Shadwan Concession (Beach 20%)

The Egyptian General Petroleum Corporation (EGPC) approved the Joint Venture submitted relinquishment area and entry into the second extension period for the concession, effective 4 August 2010.

First oil production from the NS-377 Oilfield has been delayed due to issues with equipment delivery and installation, protracted negotiations regarding a Processing and Transportation Agreement for access to a third party pipeline and recent political and social changes in Egypt. The equipment is now installed and ready, awaiting the finalisation of the Processing and Transportation Agreement. The Operator is also investigating a trucking option for excess production.

Planning is underway for a development well on the other near-shore oil discovery in the concession, NS-385. This well is anticipated to be drilled in 2012. The field is assessed to have recoverable oil reserves of 10 MMbbl (2 MMbbl net to Beach).

Planning is also underway for production from the NS-394 Oilfield, via a tieback to an existing BP/GUPCO production platform. Production is planned for FY13, with field recoverable oil reserves assessed to be 4.6 MMbbl (0.920 MMbbl net to Beach). The development is awaiting government approval.

Remaining exploration opportunities in the concession are being investigated and will be considered for drilling.

GULF OF SUEZ

EGYPT

Geisum North

Gs 327

Gs 365

Ll 87-5

Nessim

Ras El Bahar North

Shukheir

Sinai

Tawila West

Waly

Younis

NORTHSHADWAN

SOUTH EASTJULY

GulfofSuez

Oil Field/Pipeline

Gas Field/Pipeline

Beach Energy Permit

0 25

KILOMETRES

E G Y P T

S I N A I

P E N I N S U L A

El Ayun

Gharib South

Gs 277

Gs 302 2

Gs 306 1

Kareem

Naiem

Sb 284 1

July Ramadan

Ras Fanar

EG11-0010

Al Amir SE

Geyad NS-377NS-385

NS-394


South East July Concession (Beach 20%)

The Joint Venture is considering the drilling of one more exploration well prior to expiry of the concession in December 2011.

Abu Sennan Concession (Beach 22%)

Two discoveries have been made in the first two exploration wells of a six well program commenced during the reporting period in the Abu Sennan concession in the Western Desert.

The first well in the drilling program, GPZZ-4, was spudded in late December 2010. This well was programmed to appraise the late Cretaceous reservoir sands of the GPZZ Oilfield and to explore deeper early Cretaceous and Jurassic targets. The well encountered hydrocarbon

shows in the lower and upper Bahariya Formations and the Abu Roash “G” Member. Following wireline evaluation, the well was cased and suspended for a cased-hole testing program which has commenced subsequent to the reporting period.

After the reporting period, the second well in the program, Al Ahmadi-1, was drilled and encountered encouraging hydrocarbon shows within the Kharita Formation, the Lower Bahariya Formation, the Abu Roash “G” Member and the Abu Roash “E” Member. Hydrocarbon zones highlighted by wireline logging and testing in the well will be followed up with a significant cased hole testing program.

Both wells are located within 10 kilometres of existing pipeline infrastructure, which will likely expedite the tie-in of these wells. The potential reserves and commerciality of both discoveries will be assessed after the completion of all testing.

Otway Basin

PEP 168 (Beach 50%)

Prior to the reporting period, 50% equity in PEP 168 was transferred to Beach as part of the arrangement to restructure Somerton Energy Limited (formerly Essential Petroleum Resources Limited). Beach assumed operatorship of the permit effective 19 July 2010. Planning is underway for the recording of approximately 100km of 2D seismic during early 2012.

PEP 171(Beach 75%)

Beach and Somerton Energy were successful in a competitive bid process for gazettal block VIC/O-10(1) in western Victoria. Subsequent to year end, Beach and Somerton accepted an offer for the exploration permit, PEP 171, subject to completion of agreements with Native Title Claimants. The permit area is considered prospective for both conventional and unconventional oil and gas.

PEL 186 (Beach 66.7%)

Beach acquired 66.67% equity in the permit via cash purchase as part of a strategic alliance with Somerton Energy. Conventional and unconventional prospectivity exists in a number of formations throughout the permit and planning is underway to address this potential by the drilling of one exploration well during FY12.

BADR EL DIN 01

BADR EL DIN 04

BADR EL DIN 05

BADR EL DIN 11BW 1

EL DIYUR WEST

GPT

GPTSOUTHWEST

GPY

GPZZ

SHEIBA 18 1

WESTN DESERT 33

WESTN DESERT33/15

ABU EL GHARADIG

ABU EL GHARADIG NE

ABUSENNAN

ABO SENAN

BARAKA NE

ABU SENNAN

Oil Field/Pipeline

Gas Field/Pipeline

Other Permits

Beach Energy Permit

0 30

KILOMETRES

Egypt

GPZZ-4

WellEG11-0009

Al Ahmadi 1

PEL 495 (Beach 35%)

Beach was assigned a 35% equity in PEL 495 on 1 January 2011 under a farmin agreement with Cooper Energy Limited to drill one exploration well, Sawpit-2, in the permit. Beach will operate the farmin well and planning is underway for drilling the well in late 2011. The well will test the oil potential of the Lower Pretty Hill Formation and unconventional gas and liquids potential of the Casterton Formation shales.

Bass Basin

Beach has withdrawn from T/38P and T/39P after the disappointing results from Peejay-1 and Spikey Beach-1.

Browse Basin

The WA-281P Joint Venture (Beach 7.34%) is purchasing newly acquired 3D seismic data that fully covers the Burnside gas discovery and surrounds. This data is expected to be processed during late 2011 and be available for interpretation by early 2012.

Carnarvon Basin

WA-208-P (Beach 10%)

Planning commenced for the drilling of one exploration well targeting the Angel Sandstone in early 2012.

WA-264-P (Beach 16.67%)

An application for a Retention Licence over the Corowa oil discovery has been submitted to the Designated Authority. The remainder of the permit has been surrendered.

New Zealand

PEP 38482 (Beach 20%), Taranaki Basin

The Joint Venture surrendered the permit in good standing.

PEP 38259 (Beach 20%), Canterbury Basin

An application for an extension of permit conditions was submitted to the Government and is under consideration.

Papua New Guinea

Current studies are directed at evaluating market and commercialisation opportunities.

Spain

There was no significant activity in the Ebro Basin tenements (Beach 25%) during the year.

Albania

Tenure for the Durresi Block (Beach 25%) was granted in January 2011 and an 840km2 3D seismic survey was recorded during April over the A4-1X gas-condensate discovery and the surrounding area. Weather and sea conditions were favourable and the data quality excellent. Processed data is anticipated to be received during the third quarter 2011.


Beach has the option to increase its participating interest in the block to 50% via an agreement with the Operator, San Leon Energy Plc., in return for the funding of an additional 25% of the 3D seismic survey acquisition, processing and interpretation costs.

Tanzania

A Production Sharing Agreement (PSA) over the Lake Tanganyika South concession was signed on 23 June 2010. Lake Tanganyika forms part of the western arm of the 6400km long East African Rift system. Exploration in the concession will target an oil exploration play analogous to that which is yielding significant success in the Rift System in Uganda.

Airborne gravity and magnetic surveys covering the whole concession and a bathymetry survey of the lake area within the concession, were all completed by early 2011. Processing of the data was completed in late February and subsequent interpretation of the data has yielded significant information regarding structural features across the area.

The results of the surveys have been used to plan an 1800km 2D seismic survey across the lake. Beach has signed a contract with Fugro Oceansismica SpA, of Italy, for the acquisition. The seismic boat, support boats and ancillary equipment are currently being organised and the survey is expected to commence in the fourth quarter 2011. The results of this survey will allow assessment of possible drilling targets across the concession.

Williston Basin, North Dakota, USA

Surface facilities were installed and a multistage fracture stimulation of the Three Forks Formation over the 1.4 km lateral section of the Henderson 4-25H well (18.5% net revenue interest) was successfully completed in late July 2010. The well commenced flow testing at end July 2010 and was initially free flowing oil and fracture stimulation fluids, with the oil rate being approximately 1000 bopd. The well has continued to produce throughout 2011 and was flowing at a rate of approximately 125 barrels of oil per day during June 2011.

The Henderson 4-26/35H (14.7% net revenue interest) horizontal well targeting the Three Forks Formation in sections 26 and 35 was drilled in the fourth quarter 2010 and the 2.7km horizontal section was subsequently successfully fracture stimulated. Production peaked at 1,000 barrels of oil per day and the well was flowing at a rate of approximately 300 barrels of oil per day during June 2011.

Arrowie Basin – Paralana Geothermal Project

Under revised funding and farmin arrangements Beach has been assigned a 21% interest in the project.

The Paralana geothermal energy project was awarded a $62.8 million Renewable Energy Demonstration Program grant by the Federal Government and the Funding Deed was executed in July 2010. The grant monies (exclusive of GST) are to be applied to the development of a 30MW geothermal demonstration project post the proof of concept stage currently underway at the Paralana Project.

Injectivity testing was successfully undertaken over the prospective zones in the Paralana-2 well. Data collected was analysed and used to plan the main fracture stimulation program which was undertaken successfully in June 2011. A flow test is planned to be undertaken during the third quarter 2011.


Drilling Program

The drilling program for the year comprised 39 wells, of which 37 were drilled in Australia in the Cooper/Eromanga Basins. Internationally one well was drilled in Egypt and one in the Williston Basin in the United States of America.

Beach’s exploration drilling success rate over the ten year period since July 2001 now stands at 37% (54 discoveries from 145 exploration wells). Total exploration / appraisal success rate over the same period is 55% (144 successes from 260 wells).

Area Category Wells drilled Successes Success Rate

Cooper/Eromanga Exploration - Oil 10 4+ 40%

Appraisal & Development - Oil 11 11 100%

Exploration - Oil 2 2* 100%

Appraisal & Development - Gas 14 14 100%

Total Cooper 37 31 84%

Egypt Exploration - Oil 1 1** 100%

USA Unconventional Appraisal - Oil 1 1 100%

Total 39 33 85%

+ Excludes Arno-1. Beach considers the well result sub-economic and elected not to participate in casing of the well.* Encounter-1 cased and suspended pending fracture stimulation and flow testing.** GPZZ-4 cased and suspended for future testing.

YearNumber of Wells* Drilling Success Rate

Exploration Appraisal Exploration Appraisal Total

FY02 6 0 33% – 33%

FY03 6 1 50% 100% 57%

FY04 12 5 17% 60% 29%

FY05 7 8 14% 100% 60%

FY06 11 8 45% 88% 63%

FY07 35 31 34% 81% 56%

FY08 28 34 32% 68% 52%

FY09 14 16 64% 75% 70%

FY10 13 8 31% 88% 52%

FY11 13 4 54% 100% 65%

Total 145 115 37% 78% 55%

* Excluding coal seam gas drilling


Drilling Program FY11

Category Area Well Tenement ResultExploration - Oil Cooper Basin Parham-1 PEL 92 P&A

Stenhouse-1 PEL 92 P&A

Hanson-1 PEL 91 Oil Discovery

Turton-1 PEL 92 P&A

Westall-1 PEL 92 P&A

Snellings-1 PEL 91 Oil Discovery

Arno-1 PEL 91 C&S+

Watson West-1 PL 35 Oil Discovery

Wandilo South-1 PL 35 P&A

Irtalie East-1 PL 36 Oil Discovery

Western Desert, Egypt GPZZ-4 Abu Sennan C&S*

Appraisal - Oil Cooper Basin Butlers-2 PEL 92 Oil Well

Cook-16 PL 97 Oil Well


Unconventional Appraisal - Oil North Dakota, USA Henderson 4-26/35H Section 25&36 McKenzie Cty Oil Well

Development - Oil Cooper Basin Parsons-5 PPL 224 Oil Well

Parsons-3 PPL 224 Oil Well

Parsons-4 PPL 224 Oil Well

Butlers-3 PEL 92 Oil Well




Acrasia-5 PPL 203 Oil Well

Unconventional Exploration - Gas Cooper Basin Encounter-1 PEL 218 Gas Discovery**

Holdfast-1 PEL 218 Gas Discovery

Development - Gas Cooper Basin Coonatie-20 PPL 131 Gas Well

Coonatie-18 PPL 131 Gas Well

Strzelecki Northeast-1 PPL 22 Gas Well

Tirrawarra-79 PPL 20 Gas Well





Kidman North-4 PPL 24 Gas Well

Moomba-184 PPL 7 Gas Well




Nephrite South-6 PPL 140 Gas Well

+ Beach did not participate in casing – result considered by Beach to be sub-economic * Cased and suspended pending further evaluation. ** Cased and suspended for future fracture stimulation.


Somerton Energy Limited

Beach Energy Limited has retained a 56.22% interest in Somerton Energy Limited.

Somerton’s activities during the year have focussed on broadening and diversifying the company’s exploration portfolio, with the aim of gaining exposure to areas of high prospectivity for unconventional petroleum plays. This activity has primarily focused on the Otway Basin, which Somerton and Beach considers being one of the most prospective areas in Australia outside of the Cooper Basin for the discovery of shale gas and other unconventional petroleum resources. In particular, the Casterton Formation in the western Otway Basin has the potential to host significant unconventional gas and oil resources. This view has been developed utilising a combination of open file data and proprietary geochemical analyses carried out by Beach.

Otway Basin

Regional Studies

In order to accelerate its exploration for unconventional petroleum in the Otway Basin, in June 2011, Somerton, together with Beach, commissioned a proprietary study with FrOG Tech Pty Ltd, an Australian-based natural resources consultancy, which will further assess and quantify the shale prospectivity within the Otway Basin. The study will involve detailed mapping of the extent, nature and prospectivity of shale intervals within the Casterton and Pretty Hill Formations and allow better quantification of the potential resource base and the identification of potential ‘sweet-spots’ of higher prospectivity. The study is scheduled for completion in September 2011.

PEL 186 (Somerton 33.33%)

During reporting period, Somerton acquired a 100% interest in PEL 186 from Geothermal Resources Limited, and in accordance with Somerton’s strategic alliance with Beach Energy Limited, Somerton subsequently offered Beach a 66.67% interest in PEL 186 for a cash consideration. This transaction was completed in June 2011 resulting in Somerton holding 33.33% equity in the tenement.


Y

Albury

Ararat

Ballarat

Bendigo

Echuca

Hamilton

Horsham

MelbourneMt Gambier

Portland

Sale

Shepparton

Warnambool

Wodonga

PEL 495

PEP 150

PEP 168

Other Permit

0 200

KILOMETRESSM11-00118

V I C T O R I A

PERMIT LOCATION MAP

OTWAY / GIPPSLAND BASINS

Somerton Interest

N S W

S A

PEL 186

PEP 151

PEP 171

PRL 2

The terms of the sale and purchase agreement with Geothermal Resources provide that company with the option to acquire a 10% interest in PEL 186 at any time up until 27 April 2016 at a cost equivalent to 50% of total exploration expenditure incurred in the tenement from November 2010 until the time the option is exercised.

PEL 186 lies in the western Otway Basin and includes portions of the Penola, Robe and St Clair Troughs which are considered prospective for a wide variety of oil and gas plays, including unconventional plays within the Casterton and Lower Pretty Hill Formations. Planning is underway to drill one exploration well in PEL 186 during FY12.

PEL 495 (Somerton 15%)

During the reporting period, Somerton entered into a farmin agreement under which it will earn a 15% interest in PEL 495 from Cooper Energy Limited via a cash transaction and contributing to the cost to drill the Sawpit-2 exploration well. The transaction was completed in August 2011.

Beach will operate the farmin well and planning is underway for drilling the well in late 2011. The well will test the oil potential of the Lower Pretty Hill Formation and unconventional gas and liquids potential of the Casterton Formation shales.

PRL 13 (Somerton 20%)

During the reporting period, Somerton sold its 20% interest in PRL 13 (Killanoola) to Adelaide Energy Limited for a cash sum of $110,000.

PEP 168 (Somerton 50%)

Beach was appointed Operator of the PEP 168 Joint Venture in July 2010.

During the year, review of existing seismic in PEP 168 was undertaken and planning commenced for acquisition of approximately 100km of 2D seismic in the first quarter of 2012. This program, in the vicinity of the East Wing gas discovery, is designed to delineate new targets for drilling in late 2012, subject to seismic results and rig availability. Options to develop the East Wing gas discovery are also being assessed.


During the year seismic interpretation of the northern portion of PEP 151 was undertaken. This work has confirmed the presence of two potential drilling locations. The prospect of most interest is predominately located within an area of high conservation value and further seismic acquisition may not be feasible. Subject to further evaluation of environmental considerations, seismic acquisition is planned for the first quarter of 2012.


Grant of PEP 150 is contingent upon entering into agreement with the native title claimants. These negotiations are anticipated to be completed by end 2011 which should allow exploration to commence in FY12.



Somerton Energy and Beach were successful in a competitive bid process for gazettal block VIC/O-10(1) in western Victoria. Subsequent to year end, Beach and Somerton accepted an offer for the exploration permit, PEP 171, subject to completion of agreements with Native Title claimants by 30 June 2013. The permit area is considered prospective for both conventional and unconventional oil and gas.

Gippsland Basin

PRL 2 (Somerton option to earn up to 16.7%)

During the year Somerton accepted an offer from Beach to participate in that company’s farmin transaction with Lakes Oil NL (Lakes) in relation to PRL 2 in the onshore Gippsland Basin. PRL 2 is a retention lease in the onshore Gippsland Basin, eastern Victoria containing the Wombat tight gas accumulation.

Subject to completion of final documentation, Somerton will acquire from Lakes up to a 5% interest in PRL 2, by contributing to the cost of fracture stimulation and well testing. Somerton will have an option to earn a further 11.7% (bringing Somerton’s total interest to 16.7%) by contributing additional funds for further appraisal and development in PRL 2.

Farmin works commenced in December 2010 with an extended flow and pressure build-up test of a single zone in the Wombat-2 well. The well was flowed for 12 days through a 1” choke at an average rate of approximately 0.8 MMcfd before being shut-in for a four week build-up. The results of the Wombat-2 test have been used to assist in the design of the fracture stimulation program of Wombat-4, scheduled for the fourth quarter of 2011.


EXPLORATION AND PRODUCTIONTenements as at 30 June 2011

Basin State/Country Beach Group Tenements %

Cooper/Eromanga Queensland ATP 259P (Naccowlah Block and PLs) 1 38.5%

ATP 259P (Alkina Block) 28%

ATP 259P (Aquitaine A Block) 2 22.5%

ATP 259P (Aquitaine B Block) 3 20%

ATP 259P (Aquitaine C Block) 4 25.2%

ATP 259P (Innamincka Block) 5 30%

ATP 259P (Total 66 Block) 6 30%

ATP 259P (Wareena Block) 7 28.8%

PL 55 (50/40/10) 40%

PL 31 (Bodalla South Oil Field) 100%

PL 32 (Kenmore Oil Field) 100%

PL 47 (Black Stump Oil Field) 100%

PL 184 (Thylungra Gas Discovery) 8 80.396%

ATP 269P (Glenvale / Bargie JV) 93.9%

ATP 269P (Coolum / Byrock JV) 9 65.06%

SWQ Gas Unit 10 23.2%

ATP 633P 11 100%

ATP 855P 12 25%

Cooper/Eromanga South Australia PPL 203 (Acrasia Oil Field) 25%

PPL 204 (Sellicks Oil Field) 75%

PPL 205 (Christies Oil Field) 75%

PPL 209 (Harpoono Oil Field) 33.33%

PPL 210 (Aldinga Oil Field) 50%

PPL 211 (part of Reg Sprigg West Field) 25%

Reg Sprigg West Unit 6.25%

PPL 212 (Kiana Oil Field) 40%

PPL 213 (Mirage Oil Field) 40%

PPL 214 (Ventura Oil Field) 40%

PPL 220 (Callawonga Oil Field) 75%

PPL 224 (Parsons Oil Field) 75%

PEL 87 40%

PEL 90 (Candra Block) 25%

PEL 91 40%

PEL 92 75%

PEL 94 50%

PEL 95 50%

PRL 25 (Middleton Gas Field) 50%

PEL 104 40%

PRL 15 (Growler Block) 40%

PEL 106 (Brownlow Block) 50%

PEL 107 40%

EXPLORATION AND PRODUCTION TENEMENTS as at 30 June 2011

Basin State/Country Beach Group Tenements %

PRL 16 (Dunoon) 33.33%

PEL 111 40%

PEL 113 (Saintly Block) 33.33%

PEL 113 (Harpoono/Dunoon Block) 33.33%

PEL 186 66.67%

PEL 424 40%

PEL 495 35%

PEL 218 (Permian) 90%

PEL 218 (Post Permian) 13 70%

Cooper/Eromanga South Australia Udacha Unit 15%

Patchawarra East 14 17.14%

Fixed Factor Agreement 15 20.21%

SA Unit 20.21%

Arrowie South Australia GEL 156 21%

GEL 254 21%

GEL 336 21%

Otway Victoria PPL 6 (McIntee Gas Field) 10%

PPL 9 (Lavers Gas Field) 10%

PRL 1 (Buttress North) 10%

PEP 150 16 50%

PEP 168 50%

Gippsland Victoria VIC L26 (Basker, Manta, Gummy) 30%

VIC L27 (Basker, Manta, Gummy) 30%

VIC L28 (Basker, Manta, Gummy) 30%

PRL 2 (Wombat) 17 10%

Browse Western Australia WA-281-P 7.3394%

WA-411-P 9.7637%

Carnarvon Western Australia WA-208-P 10%

WA-264-P 18 16.67%

Canterbury New Zealand PEP 38259 20%

Papuan Papua New Guinea PRL 1 6.36%

Ebro Spain H22007 (Abiego) 25%

H22008 (Peraltilla) 25%

H22009 (Barbastro) 25%

H22010 (Binefar) 25%

South Adriatic Albania Durresi Block 25%

Gulf of Suez Egypt South East July 20%

North Shadwan 20%

Western Desert Abu Sennan Concession 22%

Mesaha Graben Concession 19 15%

Williston North Dakota, USA Section 25-T150N-R95W 23.147% Wi

Section 26-T150N-R95W 18.36% Wi

Section 35-T150N-R95W 18.36% Wi

East African Rift Tanzania Lake Tanganyika South 100%

1 The Naccowlah Block consists of ATP 259P (Naccowlah) and PLs 23-26, 35, 36, 62, 76-79, 82, 87, 105, 107, 109, 133, 149, 175, 181, 182, 189 and 302. Note sub-leases of PLs (gas) to SWQ Unit.

2 The Aquitaine A Block consists of ATP 259P (Aquitaine A) and PLs 86, 131, 146, 177, 208 and 254. Note sub-leases of part PLs (gas) to SWQ Unit.

3 The Aquitaine B Block consists of ATP 259P (Aquitaine B) and PLs 59 – 61, 81, 83, 85, 97, 106, 108, 111, 112, 132, 135, 139, 147, 151, 152, 155, 205 and 207. Note sub-leases of part of PLs (gas) to SWQ Unit.

4 The Aquitaine C Block consists of ATP 259P (Aquitaine C) and PLs 138 and 154.

5 The Innamincka Block consists of ATP 259P (Innamincka) and PLs 58, 80, 136, 137, 156,159 and 249. Note sub-leases of part PLs (gas) to SWQ Unit.

6 The Total 66 Block consists of ATP 259P (Total 66) and PLs 34, 37, 63, 68, 75, 84, 88, 110, 129, 130, 134, 140, 142 – 144, 150, 168, 178, 186, 193, 241, 255 and 301. Note sub-leases of part of PLs (gas) to SWQ Unit.

7 The Wareena Block consists of ATP 259P (Wareena) and PLs 113, 114, 141, 145, 148, 153, 157, 158, 187 and 188. Note sub-leases of part of PLs (gas) to SWQ Unit.

8 Registered interest of Beach is 65.59% and Mawson is 5.806%. Acquisition by Beach of 4.615% and Mawson of 0.385% subject to completion of assignment documentation and regulatory approval.

9 Current beneficial interest of Beach is 33.05% and Mawson is 13.9%. Acquisition by Beach of 12.75% and Mawson of 5.36% subject to completion of assignment documentation and regulatory approval.

10 The SWQ Gas Unit consists of subleases of PLs within the gas production area of Naccowlah Block, Aquitaine A Block, Aquitaine B Block, Innamincka Block, Wareena Block and Total 66 Block.

11 Assignment of 50% subject to completion of assignment documentation and regulatory approval.

12 Assignment subject to regulatory approval.

13 Registered interest is 90%. Assignment of 20% subject to completion of regulatory approval. Assignment of further 46.67% is subject to completion of assignment documentation and regulatory approval.

14 Patchawarra East consists of PPLs 26, 76, 77, 118, 121 -123, 125, 131, 136, 147, 152, 156, 158, 167, 182, 187, 194, 201 and 229.

15 The Fixed Factor Agreement consists of PPLs 6 – 20, 22 - 25, 27, 29 - 33, 35 - 48, 51 - 61, 63 - 70, 72 - 75, 78 - 81, 83, 84, 86 - 92, 94, 95, 98 - 111, 113 - 117, 119, 120, 124, 126 - 130, 132 - 135, 137 - 140, 143 - 146, 148 - 151, 153 - 155, 159 - 166, 172, 174 - 180, ,189, 190, 193, 195, 196, 228 and 230 - 238.

16 PEP 150 application area the subject of Native Title RTN Negotiations.

17 Subject to finalisation of formal documentation and regulatory approval. Up to 45% can be earned in Phase 1 plus Phase 2, determined by farmin expenditure and the exercise of options by Somerton Energy Limited.

18 Permit continues in effect pending retention licence application decision. Notice of intention to reject application received, and response issued. Awaiting final decision.

19 Subject to Egyptian regulatory authority approval and endorsement.


The following tenement changes occurred during FY11:

Tenements Acquired

PEL 87, PEL 104, PRL 15, PEL 111, PEL 186, PEL 424, PEL 495, PPL 213, PPL 214, Abu Sennan Conession, Mesaha Graben Concession19, Section 26-T150N-R95W, Section 35-T150N-R95W

Tenements Divested

T/38P, T/39P, PEP 38482

Somerton Energy Limited Exploration Tenements as at 30 June 2011

Basin State/Country Somerton Energy Limited Tenements %

Cooper/Eromanga South Australia PEL 186 33.33%

PEL 495 15%

Otway Victoria PEP 150 20 20%

PEP 151 75%

PEP 168 50%

Gippsland Victoria PRL 2 (Wombat) 21 5%

20 PEP 150 application area the subject of Native Title RTN Negotiations.

21 Subject to finalisation of formal documentation and regulatory approval. Up to 16.67% can be earned in Phase 1 plus Phase 2, determined by farmin expenditure and the exercise of options by Somerton Energy Limited.


GLOSSARY OFTerms

$ Australian dollars

1P Proved

2P Proved and Probable

3P Proved, Probable and Possible

ATP Authority to Prospect (QLD)

bbl barrels

bbl/MMscfd barrels per million standard cubic feet of gas

Bcf billion cubic feet

boe barrels of oil equivalent - the volume of hydrocarbons expressed in terms

of the volume of oil which would contain an equivalent volume of energy.

For example, 1 Bcf of gas equals approximately 0.18 million boe, the exact

conversion being dependent on the gas composition)

bopd barrels of oil per day

boe/d barrels of oil equivalent per day

bw/d barrels of water per day

BCG Basin centred gas

BMG Basker-Manta-Gummy oil and gas fields in the Gippsland Basin,

offshore Victoria

C&S Cased and suspended

CSG Coal Seam Gas

DST Drill Stem Test

EPT Extended Production Test

FPSO Floating Production, Storage and Offtake vessel

FSO Floating Storage and Offtake vessel

FY Financial year ended

GJ gigajoule

kbbl thousand barrels of oil

kboe thousand barrels of oil equivalent

ktonne thousand tonne

LPG Liquid Petroleum Gas

MMbbl million barrels of oil

MMboe million barrels of oil equivalent

MMscfd million standard cubic feet of gas per day

P&A Plugged and abandoned

PEL Petroleum Exploration Licence (SA)

PL Petroleum Lease (QLD)

PPL Petroleum Production Licence (SA)

PJ petajoule

TCF Trillion cubic feet

TJ terajoule

TVT true vertical thickness

CORPORATE GOVERNANCEStatement

PART 1- INTRODUCTION

The Board of Beach is committed to conducting a business that values ethical behaviour and fairness and promotes and protects the interests of its stakeholders. To achieve this Beach has policies, procedures and systems designed to promote high standards of governance. Those policies, procedures and systems are regularly reviewed and revised as required to reflect changes in governance standards and practice. Some of the charters and policies (or summaries of them) that form the basis of the corporate governance practices of Beach can be found in the corporate governance section of Beach’s website, www.beachenergy.com.au.

This statement summarises Beach’s main corporate governance principles and practices.

Beach must comply with the ASX Listing Rules, which require it to report annually on the extent to which it complied with the Corporate Governance Principles and Recommendations (Principles) released by the ASX Corporate Governance Council (Council). The Board believes that Beach has complied with all of the Principles for the current reporting period. A checklist which cross references the Principles to the relevant part of this report or the Remuneration Report is found on pages 53 to 55 of this report.

The Council released revised Principles in 2010 particularly relating to diversity, which take effect for Beach in the next reporting period. The Council has encouraged early adoption of the revised Principles. Beach has commenced its revision of its governance practices to implement the revised Principles. Beach has adopted some of the new requirements that it is only required to formally report on in the next reporting period. They are identified in this report together with the steps taken by Beach so far to adopt the revised Principles ahead of the next reporting period.

PART 2- THE BOARD OF DIRECTORS

The respective roles and responsibilities of both the Board and management are set out in the Board charter which can be viewed in the corporate governance section of Beach’s website.

2.1 The Role of the Board and senior executives

The full range of the Board’s responsibilities is extensive and includes the following:

Performance

● ensuring Beach’s long-term viability and enhancing its financial position;

● providing oversight and final approval of Beach’s corporate strategy;

● monitoring senior executives implementation of Beach’s corporate strategy;

● approving and monitoring the business plan, budget and corporate policies;

● monitoring and assessing the performance of Beach and the Board itself;

● overseeing the risk management framework and monitoring of its material business risks; and

● monitoring developments in the oil and gas industry and the operating environment.

Compliance

● understanding and protecting Beach’s financial position;

● requiring and monitoring legal and regulatory compliance;

● reviewing and approving annual accounts, annual reports and other public documents and sensitive reports; and

● ensuring an effective system of internal controls exists and is operating as expected.

Overall Operations

● establishing Beach’s vision, mission, values and ethical standards to be reflected in a Code of Conduct;

● monitoring compliance with ethical standards;

● delegating an appropriate level of authority to management and approving any changes to the delegations;

● ensuring appropriate resources are available to senior executives;

● demonstrating corporate leadership;

● assuming responsibility for the relationship with the Managing Director including his/her appointment, succession, performance assessment, remuneration and dismissal;

● overseeing aspects of the employment of the management team including remuneration, performance and succession planning;

● recommending the appointment, and reviewing the performance, of directors;

● ensuring effective communication to shareholders, staff and other stakeholders; and

● approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures.

The functions that the Board has delegated to senior executives include the following:

● recommend Beach’s corporate strategy to the Board for approval and once it is approved, implement the corporate strategy;

● assume day to day responsibility for Beach’s conformance with relevant laws and regulations and its compliance framework;

● achieve the performance targets set by the Board;

● develop, implement and manage Beach’s risk management and internal control frameworks;

● develop, implement and update Beach’s policies and procedures;

● be alert to relevant trends in the oil and gas industry and Beach’s operating environment;

● provide sufficient and relevant information to the Board to enable the Board to effectively discharge its responsibilities;

● act as a conduit between the Board and Beach; and

● manage Beach’s human, physical and financial resources to achieve Beach’s objectives – essentially “RUN THE BUSINESS”.

CORPORATE GOVERNANCE STATEMENT

2.2 Board Composition

The constitution of Beach specifies the number of directors shall be not less than three or more than seven. The Board may at any time appoint a director to fill a casual vacancy. At the date of this report, the Board has seven directors. The skills, experience, qualifications and expertise relevant to the position of each director who is in office at the date of this report, their special responsibilities and their term of office are detailed in the Directors’ Report.

The Board regularly reviews the size and composition of the Board to ensure that it continues to have the right combination of experience, diversity and competencies to fulfil its responsibilities effectively. The Board should also consist of a majority of independent non-executive directors. The Board also considers that the role of the Chairman and the Managing Director must be filled by different people and that the Chairman should be an independent director. Board reviews are conducted regularly, in part, to ensure that individual directors have continuing capacity and commitment to contribute to the fulfilment of the Company’s objectives.

2.3 Directors’ Independence

There is one executive director, Managing Director, Mr Nelson. The Board assesses independence of directors regularly against the criteria listed in its policy on director independence. In addition, directors are required to disclose information that may have an effect on their independent status. Using the criteria in its policy, the majority of the Board consists of independent directors. The independent directors are Mr Kennedy, Mr Davis, Dr Alley, Mr Butler, Ms Robinson and Mr Moretti.

Mr Kennedy has served on Beach’s Board since 1991 and has a number of other directorships. The Board has considered these issues and is satisfied Mr Kennedy remains an independent director. The Board does not consider Mr Kennedy’s other directorships in any way interfere with his ability to discharge his role and duties as Chairman of Beach. Mr Kennedy has an impeccable attendance record over many years in relation to Beach Board and committee meetings. Mr Kennedy has at all times been available to assist Beach when involved in transactional or one off matters. There is no evidence to suggest other directorships are a hindrance to Mr Kennedy fulfilling the role of Chairman.

The Board has also considered the question of whether Mr Kennedy’s longevity as a director of Beach in some way affects his independence. The Board does not believe it does. The Board has not seen any evidence that it does. The Board considers the longevity of Mr Kennedy’s appointment to be of considerable benefit. It provides large volumes of accumulated corporate knowledge and expertise and experience in the oil and gas industry at a time when Beach is investing in the most aggressive exploration and development program in its history and is positioned at the cutting edge of shale gas development in Australia.

Mr Davis is a partner of law firm DMAW Lawyers which provides legal services to Beach. Mr Davis has been an employee of, or partner in, law firms that have provided legal services to Beach for 20 years. That collective knowledge and understanding of Beach and its assets was one of the reasons he was first appointed to the Board. DMAW Lawyers is instructed in the main in relation to operational oil and gas work. Mr Davis does not himself provide these services. Decisions to instruct DMAW lawyers are made at management and not board level. DMAW Lawyers has specialist oil and gas experience that has been provided to Beach over many years. That expertise and accumulated knowledge is of separate value to Beach from Mr Davis’ role as a director.


The Board has determined that Mr Davis is an independent director. Using the materiality thresholds set by it and detailed below, the fees charged by DMAW lawyers to Beach are below these threshold amounts. This, and the fact the Board has seen no evidence that management’s use of DMAW Lawyers impacts on the independence of Mr Davis, has led the Board to determine Mr Davis is independent.

The policy on director independence defines an independent director as a non-executive director (not a member of management) who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with the independent exercise of their judgment.

In determining the independent status of a director the Board considers whether the director:

● is a substantial shareholder of Beach or an officer of, or otherwise associated directly or indirectly with, a substantial shareholder of Beach;

● is employed, or has previously been employed in an executive capacity by Beach or another group member, and there has not been a period of at least three years between ceasing such employment and serving on the Board;

● has within the last three years been a principal of a material professional adviser or a material consultant to Beach, or another group member, or an employee materially associated with the service provider;

● is a material supplier or customer of Beach, or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;

● has a material contractual relationship with Beach or another group member, other than as a director.

The Board has also adopted the following materiality thresholds to assist with determining independence:

● a professional adviser or consultant to Beach is material where the fees charged to the Beach group in a financial year is more than 10% of the annual gross revenue of the adviser or consultant or their firm or $1.5 million, whichever is the lesser;

● a supplier or customer of Beach is material where the value of the purchases or sales accounts for more than 5% of Beach’s annual consolidated gross revenue or $1.5 million, whichever is the lesser;

● a contractual relationship with Beach is material where the value of the contract is more than 5% of Beach’s annual consolidated gross revenue, or the contract is for more than 3 years.

2.4 Re-election of Directors, Director selection and Board renewal

The Board is in the process of reviewing the procedures for selection, appointment and re-appointment of its directors to promote investor understanding and confidence in the process. The constitution of Beach and the ASX Listing Rules require that at each annual general meeting, one third of directors (excluding the Managing Director) together with any director appointed since the last annual general meeting, retire from office. Retiring directors are eligible for re-election. Retiring directors, offering themselves for re-election, will have a


performance review before their offer is accepted by the Board which includes an assessment of that director’s competencies and ongoing capacity and commitment to fulfil the role. The procedure for re- election of incumbent directors is set out in the corporate governance section of Beach’s website.

The Remuneration and Nomination Committee oversees the Board succession planning process. The procedure for selection and appointment of new directors is set out in the corporate governance section of Beach’s website. The competencies that are considered in an individual candidate include:

● industry knowledge or ability to acquire that knowledge;

● independence determined in accordance with Beach’s policy on independence (where relevant);

● personal and professional integrity, good communication skills and ability to work harmoniously with fellow directors and management;

● demonstrated and recognised knowledge, experience and competence in business including financial literacy;

● ability to analyse information, think strategically and review and challenge management in order to make informed decisions and assess performance.

This process led to the appointment of Ms B Robinson as a non-executive director on 27 May 2011.

2.5 Conflicts of Interest

Each director has agreed in writing to provide the following information to Beach on a regular basis:

● details of all securities held in Beach, registered both in the director’s name and in any other entity in which that director has a relevant interest within the meaning of the Corporations Act; and

● details of all contracts to which the director is a party to or under which the director is entitled to a benefit made available to him or her by Beach.

In addition, directors and executives must disclose to the Board any material contract in which they may have an interest. In compliance with the Corporations Act, any director with a material personal interest in a matter being considered by the Board, must not be present when the matter is being considered, and must not vote on the matter, unless invited to vote and/or remain by the non-conflicted directors.

2.6 Independent Professional Advice and Access to information

A director has the right to seek independent professional advice concerning or in relation to the rights, duties and obligations of the director in relation to the affairs of Beach, at Beach’s expense. The Chairman’s prior approval of such expenditure is required.

Directors have direct access to the company secretaries. Subject to obligations of confidentiality and privacy, directors also have access to Beach’s information and records and employees. In addition to regular reports to the Board, directors may request further reports or information necessary to make informed decisions from management through the Managing Director and/or the Board at any time.


2.7. Performance Evaluation

A internal performance evaluation of the Board, each sub-committee of the Board and individual directors was undertaken during the reporting period in accordance with the process for reviews disclosed in the corporate governance section of Beach’s website. The evaluation was conducted by way of questionnaire and interview. The outcomes of the review are taken into account in setting activities to continue to improve Board performance and efficiency.

The Managing Director and senior executives participate in annual performance reviews. Performance is measured against key performance indicators relevant to Beach’s general objectives and to the executives’ role. A performance evaluation for senior executives took place for the current reporting period in accordance with the process. A description of the performance evaluation process can be viewed in the corporate governance section of Beach’s website.

2.8 Directors and Senior Executives Remuneration

Details of the remuneration structure of and remuneration paid to non-executive directors are set out in the Remuneration Report contained in the Directors’ Report. The structure and details of the remuneration of the Managing Director and senior executives are also set out in the Remuneration Report contained in the Directors’ Report. Details of the nature and amount of the remuneration and what the relationship is with the performance of Beach are also contained in the Remuneration Report.

PART 3- BOARD COMMITTEES

The Board has an Audit Committee, Remuneration and Nomination Committee, a Corporate Governance Committee and a Corporate Development Committee to assist it to meet its responsibilities. Each committee has a specific function that has been detailed in a charter. Details of the number of committee meetings held and its attendee’s are set out in the Directors’ Report. Further details of the qualifications of each committee’s members are set out in the Directors’ Report.

3.1 Audit Committee

The Audit Committee’s members are Mr Butler (chairman), Mr Kennedy and Mr Davis, all of whom are independent non-executive directors and have financial qualifications. The committee:

● monitors the integrity of the statutory financial statements;

● reviews the statutory financial statements and reports and makes recommendations to the Board;

● liaises with external auditors and reviews their reports;

● reviews internal financial controls and internal control and risk management systems; and

● makes recommendations to the Board concerning the appointment of Beach’s external auditor.


The committee meets at least three times a year and the external auditor, Managing Director and Chief Financial Officer/Company Secretary are invited to attend the meetings, at the discretion of the committee. Its charter can be viewed in the corporate governance section of Beach’s website.

3.2 Remuneration and Nomination Committee

The Remuneration and Nomination Committee’s members are the Chairman, Dr Alley and Mr Davis. The role of the committee is to review and make recommendations to the Board for approval of the remuneration packages of senior executives and senior managers, remuneration policies and practices including incentive schemes and performance targets generally, appointment of directors, evaluation of the Board’s performance, and to consider succession planning issues generally for Beach. The committee is also responsible for matters relating to Beach’s Diversity Policy. Beach has also considered the new legislation relating to key management personnel and has altered the role of this committee to take account of those changes. Its charter can be viewed in the corporate governance section of Beach’s website.

The composition of the Committee has been reviewed in view of the amended Principles and it is compliant with the required structure:

● consists of a majority of independent directors;

● is chaired by an independent director; and

● has at least three members.

3.3 Other Board Committees

The Corporate Governance Committee’s members are Mr Davis (chairman), Mr Butler and Mr Moretti. Its role is to oversee the corporate governance policies and procedures of Beach. Its charter can be viewed in the corporate governance section of Beach’s website.

The Corporate Development Committee’s role is to consider and assess corporate opportunities for Beach and to oversee the process of strategic management of current corporate projects of Beach. Its members are the Chairman, the Managing Director and Mr Moretti.

PART 4 - PROMOTE ETHICAL AND RESPONSIBLE BEHAVIOUR

4.1 Code of Conduct

Beach has a code of conduct that sets out standards of behaviour expected of its directors and employees and those Beach contracts to do work for it. Those standards require:

● compliance with the laws that govern Beach and its operations;

● its people to act honestly and with integrity and fairness in all dealings with others and each other;

● avoidance or management of conflicts of interest;

● Beach’s assets to be used properly and efficiently for Beach’s benefit;

● a contribution to the well being of Beach’s key stakeholders;

● exemplary corporate citizenship.


There is also a procedure to report breaches or possible breaches of the code of conduct. To complement the code of conduct a whistleblower policy and procedure have also been introduced to encourage the reporting of unethical behaviour in an environment free from reprisal or intimidation. The code of conduct can be viewed in the corporate governance section of Beach’s website.

4.2 Trading in Beach Securities

Beach’s trading policy has been updated to comply with the recent listing rule and Corporations Law requirements that came into effect in January and July 2011. Beach’s securities trading policy restricts directors and employees from dealing in its securities where price sensitive information is known within Beach but is not generally available and in other specified non-trading periods. Directors and employees are obliged to give prior notice of an intended dealing in Beach’s securities and seek confirmation that the proposed dealing complies with the policy. If the dealing is subsequently made, the details must be notified to Beach within two business days. The policy also prohibits directors and employees from hedging unvested securities, such as unvested options or options that are vested but under a holding lock, that were issued under a Beach equity based incentive plan. In addition directors undertake to provide all details of their dealings in Beach securities so that this information can be notified to the ASX. Beach’s Share Trading Policy can be viewed in the corporate governance section of Beach’s website.

4.3 Diversity

Beach has adopted a Diversity Policy which can be viewed in the governance section of Beach’s website. Beach is committed to a workplace culture that promotes the engagement of well qualified, diverse and motivated people across all levels to assist Beach to meet its objectives. The Board is establishing measurable objectives for achieving gender diversity and will provide its report on its progress in the next reporting period. However, the Company has committed and implemented a number of diversity initiatives which include:

● review of pay equity between genders which commenced in 2010;

● support for indigenous mentoring programs both in Australia and in other countries where Beach operates;

● participation in leadership initiatives run by government and the private sector;

● workplace flexibility;

● industry support for women through the Women in Resources Industry group.

The Remuneration & Nomination Committee is responsible, at least annually, to review and report on the relative proportion of women and men in Beach’s workforce at all levels. The details at the end of this reporting period are as follows:

Males Females TotalAdministration – 10 10

Board (non executive) 5 1 6

Production 22 – 22

Professional Staff 20 17 37

Senior Management 4 2 6

Technical 31 4 35

TOTAL 82 34 116


PART 5 - RECOGNISE AND MANAGE RISK

5.1 Risk Oversight and Management

The Board has responsibility for overseeing Beach’s risk management framework and monitoring risks including its material business risks. As set out in the Board Charter, senior management is required to develop, implement and manage Beach’s risk management and internal control framework. This necessarily requires management to report to the Board on its management of these tasks and particularly whether Beach’s material business risks are being managed effectively. Beach has a Risk Management Committee comprising senior executives. The committee’s role is to take responsibility for:

● the design and implementation of the risk management and internal control system to manage material business risks;

● assisting the Board to review the effectiveness of those management systems; and

● reporting to the Board on whether Beach’s material business risks are being managed effectively.

Beach’s risk management system has a framework that is underpinned by various policies and practices that are intended to ensure:

● a consistent approach to managing risk, including maintaining a centralised corporate risk register;

● a consistent approach to monitoring and reviewing risk mitigation plans; and

● regular reporting to relevant stakeholders including financial, operational and technical reports.

Risks are identified and ranked using a likelihood and consequence methodology. Risks identified as material are included in a material risk register which is regularly reviewed by the Risk Management Committee to ensure that action is implemented to manage and mitigate each of those risks. The Board receives a regular report from this committee which includes details of new material risks, alteration of risk profiles and current issues for consideration.


Males

Females

Gender proportions at Beach

29%

71%

The Audit Committee has a role in assisting the Board to oversee risk management issues in the area of financial reporting risk management and internal control and to test the effectiveness of the system.

Beach’s material business risks include operational risks, commercial risks, legal and contractual risks and financial risks. A description of Beach’s risk management policy can be viewed in the corporate governance section of Beach’s website.

5.2 Statements on Risk Management

In addition to periodic reporting to the Board as detailed earlier, senior management has reported to the Board as to the effectiveness of Beach’s management of its material business risks and that report has been received by the Board.

The Board has also received assurance from the Managing Director and the Chief Financial Officer that:

● the declaration provided in accordance with section 295A of the Corporations Act is founded on a system of risk management and internal control; and

● the system is operating effectively in all material respects in relation to financial reporting risks.

5.3 External Audit

Beach’s external auditor is Grant Thornton. The Audit Committee is responsible for making recommendations to the Board on the selection, appointment, reappointing or replacement (subject, if applicable, to shareholder ratification), remuneration, monitoring of the effectiveness, and independence of the external auditors, including resolution of disagreements between management and the auditor regarding financial reporting and rotation of audit partners. The lead audit partner and review partner of the external auditor must rotate every five years. The first rotation occurred in the 2007 reporting period as required by the Corporations Act.

The external auditor is not engaged to perform any non-audit services that may impair the judgment of the external auditor or independence in respect of Beach. It is the Audit Committee’s role to assess and approve any audit and non-audit services that might be provided by the external auditor.

PART 6 - DISCLOSURE TO AND COMMUNICATION WITH SHAREHOLDERS

6.1 Timely and Balanced Disclosure

Beach operates under the ASX’s continuous disclosure regime whereby relevant information that could be seen to affect the share price in any way is immediately made available to shareholders and the public as a release to the ASX. The release is also placed on Beach’s website. Beach’s Continuous Disclosure Policy sets out the requirements and processes put in place by Beach to ensure that its obligations to disclose relevant information are met and to ensure accountability at senior executive level for that compliance. The policy can be viewed in the corporate governance section of Beach’s website.


6.2 Communication with Shareholders

Beach’s website is available for all shareholders and other interested parties to access current, publicly available information on Beach. In addition to the annual report, Beach distributes a half yearly review of its activities and results. These are also posted on the website and sent to shareholders. Shareholders can elect to receive communications by post or by email notification through Beach’s website. Beach has also engaged investor relations personnel to assist in responding to shareholder enquiries.

Beach encourages its shareholders to attend its annual general meetings and to discuss and question the Board and management. Representatives of the external auditor are invited to attend the annual general meeting and will be available to answer questions from shareholders concerning the conduct of the audit and the preparation and content of the auditor’s report.

A description of the arrangements Beach has in place to promote communication with shareholders can be viewed in the corporate governance section of Beach’s website.

Checklist of Corporate Governance Principals & Recommendations Reference

Principle 1 – Lay solid foundations for management and oversight

1.1 Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

2.1

1.2 Disclose the process for evaluating the performance of senior executives. 2.7

1.3 Provide the information indicated in Guide to reporting on Principle 1. 2 and 2.7

Principle 2 – Structure the Board to add value

2.1 A majority of the board should be independent directors. 2.3

2.2 The chair should be an independent director. 2.2 and 2.3

2.3 The roles of the chair and chief executive officer should not be exercised by the same individual.

2.2

2.4 The board should establish a nomination committee. 3.2

2.5 Disclose the process for evaluating the performance of the board, its committees and individual directors.

2.7

2.6 Provide the information indicated in Guide to reporting on Principle 2.2.2, 2.3, 2.6, 2.7 and 3.2

Principle 3 – Promote ethical and responsible decision-making

3.1 Establish a code of conduct and disclose the code or a summary of the code as to:

• the practices necessary to maintain confidence in Beach’s integrity• the practices necessary to take into account their legal obligations and the reasonable expectations of stakeholders• the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

4.1


3.2 Establish a policy concerning trading in company securities by directors, officers and employees and disclose the policy or a summary of that policy.

4.2

3.2 Establish a policy concerning diversity and disclose the policy or a summary of the policy. (Change to Principles for 2011/12 reporting period)

4.3

3.3 Disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. (Change to Principles for 2011/12 reporting period)

4.3

3.4 Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. (Change to Principles for 2011/12 reporting period)

4.3

3.5 Provide the information indicated in Guide to reporting on Principle 3. 4.1 and 4.2

Principle 4 – Safeguard integrity in financial reporting

4.1 The board should establish an audit committee. 3 and 3.1

4.2 Structure the audit committee so that it :

• consists only of non-executive directors• consists of a majority of independent directors• is chaired by an independent chair, who is not chair of the board• has at least three members.

3.2

4.3 The audit committee should have a formal charter. 3 and 3.1

4.4 Provide the information indicated in Guide to reporting on Principle 4. 3, 3.1 and 5.3

Principle 5 – Make timely and balanced disclosure

5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

6.1

5.2 Provide the information indicated in Guide to reporting on Principle 5. 6.1

Principle 6 – Respect the rights of shareholders

6.1 Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose the policy or a summary of the policy.

6.2

6.2 Provide the information indicated in Guide to reporting on Principle 6. 6.2

Principle 7 – Recognise and manage risk

7.1 Establish policies for the oversight and management of material business risks and disclose a summary of those policies.

5.1


7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.

5.1 and 5.2

7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

5.2

7.4 Provide the information indicated in Guide to reporting on Principle 7. 5.1 and 5.2

Principle 8 – Remunerate fairly and responsibly

8.1 The board should establish a remuneration committee. 3 and 3.2

8.2 Structure the remuneration committee so that it :

• consists of a majority of independent directors• is chaired by an independent chair• has at least three members.

3.2

8.3 Clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.

2.8 and Remuneration Report

8.4 Provide the information indicated in Guide to reporting on Principle 8.2.8, 3.2, 4.2 and Remuneration Report


FINANCIAL REPORT30 June 2011

The Financial Report is presented in Australian currency.

Beach Energy Limited is a company limited by shares, incorporated and domiciled in Australia.

Its registered office and principal place of business is:

25 Conyngham Street GLENSIDE SA 5065

A description of the nature of the Company’s operations and its principal activities are included in the Operations Report and in the Directors’ Report released herewith.

The Financial Report was authorised for issue by the Directors on 30 August 2011. Beach has the power to amend and reissue the Financial Report.

Through the use of the internet, Beach has ensured that all corporate reporting is timely, complete, and available at minimum cost to Beach. All press releases, financial reports and other information are available on Beach’s website: www.beachenergy.com.au.

57 Directors’ Report

67 Remuneration Report

85 Directors’ declaration

86 Income statement

87 Statement of other comprehensive income

88 Statement of financial position

89 Statement of changes in equity

90 Statement of cash flows

91 Notes to the financial statement

143 Independent auditor’s report

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