Woodside profit halved as oil price slump hits home

CEO Peter Coleman expects to see less turbulence in oil prices after a chaotic past two years.

Woodside Petroleum CEO, Peter Coleman.

First-half earnings at Woodside Petroleum have halved, with only deep cost-cutting efforts preventing Australia’s largest independent oil and gas company from suffering an even worse profit slump.

Woodside (WPL) today booked a net profit of $US340 million for the six months through June, a 50 per cent slide year-on-year. Revenue slipped 24 per cent to $US1.94 billion.

The earnings fall would have been worse were it not for a 38 per cent year-on-year improvement in its production costs.

Woodside chief executive Peter Coleman told The Australian that the cost improvement was the result of a two-year focus throughout the company to rein in spending.

“It’s been driven by a fundamental change in internal culture within Woodside and a willingness on behalf of our contractors and suppliers to work with us in a collaborative way as we work through this,” Mr Coleman said.

The first half saw crude oil prices touch a 13-year low of $US28 a barrel as several of OPEC’s lowest-cost producers, led by Saudi Arabia, maintained high levels of production to compete with North American shale gas and sands oil. That has saw oil prices fall more than 70 per cent from the highs of 2014 to the February low point.

Mr Coleman said he expected to see less turbulence in oil prices after a chaotic past two years in energy markets.

“I think we will still see some volatility but the degree of the volatility will get smaller and smaller,” he said.

“We’re now starting to see some of that physical rebalancing [in oil markets] so some of those uncertainties that were driving those wild swings in price are now being dealt with in the market.”

Woodside’s production volume lifted 9 per cent over the half to 45.9 million barrels of oil equivalent, taking sales to $US1.8bn — a 22 per cent reduction year-on-year.

The group raised its 2016 output guidance to 90 to 95mmboe, an increase on its 86 to 93mmboe target outlined in February, although the increase had been widely anticipated by analysts after Woodside’s recent quarterly production reports showed strong output from its Pluto LNG plant.

Woodside will pay a US34c dividend.

Shares in the company were up 2.24 per cent in early afternoon trade on a day when the share prices of its Australian peers were either flat or down.