Woodside upbeat on spending spree but lower prices sting revenue

Woodside boss Meg O’Neill is confident that the energy major’s surprise $1.8 billion bid for a US liquefied natural gas (LNG) exporter will pay off as the company moves to quell investors discontent about its recent spending spree.

The $52 billion oil and gas heavyweight surprised the market in July with its acquisition of US LNG hopeful Tellurian, in a $US1.2 billion ($1.8 billion) deal to obtain its permitted and designed Driftwood project in Texas.

Perth-based Woodside on Tuesday, posted a 19 per cent – or more than $2 billion – slump in revenue for the six months ended June 30. Underlying net profit for the period slipped 14 per cent to $US1.63 billion ($2.41 billion), due to lower prices and production.

Woodside Energy CEO Meg O’Neill at the company’s annual investor briefing in Sydney last November.Credit: Louie Douvis

Australia’s largest oil and gas company received the equivalent of $US63 a barrel in the six months to June, $US11 less than a year ago, while production was down two per cent, leading to the revenue dip. The company cut its interim dividend to 69US¢ ($1.02) a share fully franked.

In Australia, Woodside produces the gas it subsequently liquefies for export, but it will buy the natural gas to supply Driftwood, which could export 27.6 million tonnes of LNG a year.

O’Neill told investors on Tuesday that the LNG coming out of Driftwood should fetch a price in Europe and Asia that will be higher than what it will cost Woodside to buy and then liquefy the natural gas at Driftwood.

“The US onshore shale gas business is very different from what we have capability and skills in,” she said. “The market is so deep and so liquid we can buy gas off the grid.”

O’Neill added that Woodside’s knowledge of LNG plants and marketing, and its financial strength, gives it an edge over its US competitors.

Woodside’s substantial cash pile is also expected to help it to avoid complex and expensive project financing, which forces other US projects to first find buyers and then finance before committing to construction.

“We’re able to take steps in parallel,” she said.

O’Neill also highlighted the progress made on other new projects, with first production from the Sangomar oil project in Senegal coming online and construction of the Scarborough to Pluto gas export project now two-thirds complete.

While the focus of investors is on the new assets, Woodside’s plans to clean up its oldest facilities in the Bass Strait suffered a setback this month when operator ExxonMobil withdrew a proposal to leave the lower parts of many platforms in the sea forever.

Commonwealth law requires everything to be removed unless the regulator, NOPSEMA (National Offshore Petroleum Safety and Environmental Management Authority), can be convinced it will result in a better environmental outcome.

“We understand we need to do more work here to convince NOPSEMA,” O’Neill said, adding it was too early to say how long that would take.

“The science is very compelling that it’s better for the marine environment to leave dumb steel in place.”

O’Neill does not expect the decision would require Woodside to increase its financial provisions for decommissioning.

Woodside shares closed the trading day 3.9 per cent higher at $27.42.

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