It’s getting to be an annual event now.
Woodside Petroleum, Australia’s second-largest oil and gas producer reveals once, twice or even thrice in a year, that the previous targets for raised output have been lowered due to various factors: bad weather, production or technical problems.
But rather than hurt the profit line, the company has been saved, if you like, from the full force of the downgrades by rising world oil prices.
And it will probably be the same again this year with the first downgrade so far marginal; thanks to lost production in the Gulf of Mexico after operator BHP Billiton found problems with the hull at the Neptune oil and gas project.
Woodside said in a statement to the ASX that BHP is undertaking further structural inspection of the platform to determine any required action.
Woodside has a 20% stake in the Neptune project.
BHP returned personnel to the Neptune platform yesterday.
The company was forced to evacuate all workers from the platform, which is 200 kilometres off the Louisiana coast, after structural anomalies were discovered in the hull before Easter.
Neptune was expected to start first production by the end of this month, but BHP, the major shareholder and operator, now says that is being updated.
The project is expected to produce about 50,000 barrels of oil a day when it starts.
Woodside said its 2008 production target "is estimated to be impacted by 0.15 million barrels of oil equivalent (boe) per month from 1 April 2008 until the issue is resolved".
That news and lower oil prices (they dipped below $US100 a barrel), saw Woodside shares lag the wider sharemarket rally yesterday.
The shares jumped 2.3%, or $1.19, to $52.45, with the wider market 4% ahead at one stage. The rebound retraced to where WPL shares ended up down 90c at $50.35.
That was a big loss on a day when the market was sharply higher.
Woodside produced 70.6 million barrels oil equivalent (MMboe) in 2007, an increase of 4% on 2006. At one stage the projection was for a 10% plus rise.
This year the company has targeted full year production of 80 to 86 MMboe (an increase of 13% to 22% over 2007).
It said in its profit full year profit statement last month that the production increase will be achieved with a "full year of Stybarrow oil, the ramping up of Otway gas plus the start-up of four new projects: Neptune oil, Vincent oil, Angel gas and NWSV Train 5.
"The 2008 target takes into account the sale in 2007 of Legendre oil production assets and total assets in Mauritania.
"Subsequent to year-end, Woodside announced on 11 February 2008 that it had agreed to buy Shell’s North West Shelf oil assets for US$398.5 million.
"The asset transfer and completion date is subject to standard regulatory and joint venture participant approvals, approval by the Company shareholders, as well as the Board of Shell. Woodside will review its 2008 production target after the completion of the transaction."
So it’s quite probable that the acquisition of the Shell oil assets will see higher production this year, and more than make up for the loss from Neptune.
But investors treated the shares cautiously yesterday.
