Woodside, Santos Ride Higher Oil Prices

There were solid third quarter production reports from local energy majors Woodside and Santos which show they appear to be catching the recent oil price surge with higher production and sales.

Both companies delivered quarter-on-quarter increases in their oil and gas output and sales volumes for the three months to September 30.

Oil prices rose $5.3% in the quarter for Brent, the global benchmark and 4.3% for West Texas Intermediate, the US benchmark. Brent topped $US80 a barrel, WTI 70%. On top of this, the surging demand from China saw LNG prices rise 21% in the three months to September.

Woodside production rose from 20.3 million barrels of oil equivalent (MMboe) in the third quarter of 2017 to 23.1 MMboe this year.

Total revenues were 27 percent higher than the same time last year, rising to $US3.7 billion from $US2.9 billion in 2017.

Much of this was driven by production from its Pluto LNG project, off the WA coast, which accounted for nearly half of Woodside’s revenue.

“Production at Wheatstone LNG continued ahead of plan, underpinning a 13.8 percent rise in output compared with the corresponding quarter in 2017,” Woodside CEO Peter Coleman said in a statement with the production report.

“Sales revenue increased 25.4 percent over the same period to $US1.2 billion on the back of higher prices, although sales volumes were tempered slightly by the timing of Woodside equity sales,” Mr. Coleman said.

The third quarter also marked a record for Woodside, with the delivery of its 5000th LNG cargo from its North West Shelf project in Western Australia.

“During the quarter we made excellent progress on our near-term growth projects at Greater Western Flank Phase 2 and Greater Enfield, further demonstrating our capability to successfully execute our next phase of developments in Senegal and the Burrup Hub.

“In September, the Browse Joint Venture confirmed the Browse to North West Shelf development concept. Contracts have now been awarded for the concept definition engineering design of the FPSO facilities and for the pipeline survey. Execution of preliminary tolling agreements between the North West Shelf Project participants and both the Browse Joint Venture and the Clio-Acme titleholders are expected shortly.

“We have also selected our preferred execution contractor for the proposed expansion of the Pluto LNG facility. Work will now include refining the concept and costs for Pluto Train 2, in preparation for the entry into front-end engineering and design, targeted for the first quarter of 2019.

“Looking ahead in Senegal, we are on schedule to submit the SNE Field Development and Exploitation Plan and expect to assume operatorship of the development in the fourth quarter,” he said.

Woodside shares eased 0.8% to $36 as global oil prices eased.

Meanwhile, Santos has lifted its production guidance by an additional 1 MMboe while cutting its capital expenditure guidance for the year by $50 million.

“Strong operating performance during the third quarter saw sales, production, and sales revenues all higher than the previous quarter,” Santos chief executive Kevin Gallagher said.

Santos’s quarter-on-quarter production rates rose 6% as the company recovered from production outages at its PNG LNG project after a devastating earthquake earlier in the year.

Its sales volumes rose 10% quarter-on-quarter to $US973 million. Santos also saw a massive boost in returns thanks to a 42% increase in the realised oil price.

For the first nine months of 2018 revenues are up 18% to $US2.653 billion, from $US2.246 billion.
The company’s proposed $2.9 billion acquisition of WA-based energy group Quadrant Energy has also strengthened the market’s faith in Santos’s growth.

As at September 30, Santos said it had cash and cash equivalents of $US1.8 billion and total debt of $US3.8 billion, resulting in net debt of $2 billion.

Santos shares eased 0.2% to $7.02.

Glenn Dyer

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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