Woodside Upbeat Despite Weak Quarter

By Glenn Dyer | More Articles by Glenn Dyer

Woodside Petroleum shares took yesterday’s weak first quarter production and sales report in their stride, rising because global oil prices firmed, then falling after Kuwaiti oil workers ended a brief strike, thereby restoring around 1.9 million barrels a day of production to global oversupply.

Oil futures dipped 2% or more to under $US40 a barrel. The Aussie dollar, which has charged over 78 US on the back of the Kuwaiti strike, fell back under once news of the end became known in markets.

The shares rose 1.2% to $27.15, then fell 1.3% to $26.46 after Woodside confirmed many market forecasts that the company was again hit hard by the fall in global oil and gas oil prices – even though they have rebounded from multi-year lows in January and early February.

Woodside revealed a 30.3% fall in sales revenue for the first quarter of its 2016 financial year as the impact of lower oil and LNG prices hit home,

Sales for the first three months of 2016 fell to $US982 million ($A1.3 billion) from just over $US1.4 billion in the year-earlier period, despite an 8.7% rise in production to 23.7 million barrels of oil equivalent.

CEO Peter Coleman preferred to focus on the company’s low-cost, high-value growth strategy, which he said was “progressing well”. Shareholders will be looking for more detail on this approach at the company’s AGM to be held later today in Perth.

As part of this new approach, Woodside last month abandoned plans to proceed with a $US40 billion-plus floating an LNG project at its Browse gas project off the far north-west coast of Western Australia.

It is looking for smaller, cheaper options. Last week, it said it was close to a final investment decision on its Greater Enfield oil project off north west WA, while it is planning to bring its gas discoveries near Myanmar into production as soon as possible.

Woodside revealed in yesterday’s report that it had started early engineering and design work on a project to process gas from Hess Corp’s Equus prospect near the North West Shelf venture. That was a deal agreed to in 2014.

The Equus project is expected to involve some $US6 billion of investment on offshore gas development, according to some estimates and will be the first time the North West Shelf venture will process gas from a third party.

Mr Coleman said Woodside was using the current market downturn to drive down costs at new projects.

"We are taking advantage of market conditions and applying latest technology to reduce life cycle costs, further enhancing our position as a low cost operator," he said in the quarterly report.

"This will also improve project concepts to deliver a portfolio of globally competitive decision-ready projects."

Production volumes slid 4.8% from the December quarter, due to maintenance work at the North West Shelf venture’s oil production project and lower oil volumes at older projects.

The Balnaves oil venture, which Woodside only acquired last year as part of its $US3.75 billion acquisition of assets from Apache Corporation has already ceased production (on March 20).

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About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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