Higher oil prices drive Woodside revenues

21st October 2021 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – ASX-listed Woodside Petroleum has reported a 19% increase in sales revenue for the third quarter ended September, compared with the previous quarter, despite a 2% fall in production.

The company on Thursday reported that production in the three months to September reached 22.2-million barrels of oil equivalent, while sales revenue reached A$1.53-billion.

Woodside CEO Meg O’Neill said sales revenue for the third quarter climbed 19% compared with the preceding three months on the back of stronger average realised liquefied natural gas (LNG) prices.

“Revenue from LNG sales during the period was 27% higher than the second quarter despite production being impacted by planned maintenance activities at the North West Shelf project and Pluto LNG.

“Our portfolio realised LNG price was A$57 per barrel of oil equivalent and our strong realised oil price of A$80 per barrel reflects continued demand for Vincent crude in oil blending markets.

“We expect in the fourth quarter to see the benefit of stronger pricing on our realised prices, reflecting the oil price lag in many of our contracts and recent increases in gas hub prices. Our production guidance remains unchanged at 90-million to 93-million barrels of oil equivalent.”

O’Neill noted that global oil and gas prices have continued their upward trajectory, underlining the rebound in demand as economic activity has picked up in Asia and elsewhere. In addition, short-term gas hub prices in Europe and Asia have experienced unprecedented and sustained increases in both value and volatility with pricing indices in both markets recently reaching all-time highs.

“Woodside’s full-year uncontracted LNG production sold on a spot basis is expected to be slightly above 15% and includes additional November spot volume recently released to Woodside from the North West Shelf. During the quarter, we sold six equity LNG spot cargoes and we are currently expecting approximately 17% of produced LNG to be sold on a spot basis in the fourth quarter.”

Meanwhile, O’Neill noted that the agreement to pursue a proposed merger of Woodside and BHP’s petroleum business was progressing as planned. Execution of a share sale agreement and an integration and transition service agreement were expected in November, in advance of targeted completion in the second quarter of 2022 following all approvals.

It is proposed that BHP’s oil and gas business would merge with Woodside, and Woodside would issue new shares to be distributed to BHP shareholders. The expanded Woodside would be owned 52% by existing Woodside shareholders and 48% by existing BHP shareholders.

The proposed merger would create the largest energy company listed on the ASX, with a global top 10 position in the LNG industry by production, with the merged entity having delivered some 200-million barrels of oil equivalent in the 2021 financial year.

The merged company would have a diversified production mix of 46% LNG, 29% oil and condensate and 25% domestic gas and liquids, as well as a wide geographic reach with production from Western Australia, east coast Australia, US Gulf of Mexico, and Trinidad and Tobago with approximately 94% of production from OECD nations. Furthermore, the enlarged Woodside would have 2P reserves of over two-billion barrels of oil equivalent comprising 59% gas, and 41% liquids.

O’Neill on Thursday also told shareholders that Woodside was on track for its targeted final investment decision (FID) on the Scarborough and Pluto Train 2 developments before the end of this year.

“All major contracts and Commonwealth and Western Australia primary environmental approvals to support an FID are now in place, and commercial agreements are approaching finalisation.

“The proposed Scarborough and Pluto Train 2 equity sell-downs are progressing well, and timing of the Pluto Train 2 sell-down is aligned with the targeted FID later this year.

“An important milestone has been achieved with the issue of a limited notice to proceed to Bechtel for Pluto Train 2, enabling engineering and procurement activities to progress, as well as the commencement of early works for the temporary construction accommodation village in Karratha.

“Significant progress was made at our Sangomar Field Development Phase 1 offshore Senegal, with the project’s first development well drilled and completed. We have also begun discussions with interested parties for the proposed sell-down of our equity in the Sangomar project to a targeted 40% to 50%.

“We have secured emerging opportunities as part of our strategy to create a significant business in new, lower-carbon sources of energy. These include signing of an agreement to undertake a joint feasibility study into the development of an ammonia supply chain from Australia to Japan and a commitment to invest in HyStation, a company which aims to accelerate the conversion of bus fleets in South Korea from diesel to hydrogen.

“In addition, in October we announced our collaboration with Heliogen to begin procurement for a 5 MW commercial-scale demonstration facility using Heliogen’s AI-enabled concentrated solar technology,” she said.