Woodside books record annual production, strikes best ever LNG price
Woodside Petroleum has booked record annual production, and agreed its highest ever spot LNG price for the coming quarter.
Woodside Petroleum says it is confident it has the financial firepower to push ahead with the $16bn development of its Scarborough project after other major gas expansions fell victim to the pandemic, and after the company finished 2020 on a high amid record annual production and sales revenue up 32 per cent to $920m in the December quarter.
Woodside chief financial officer Sherry Duhe said discussions were ongoing to lock in further offtake partners for Scarborough gas, after Germany’s Uniper upped its contract volumes this week, and the company was “incredibly confident” it could make a call on the LNG project later this year.
She said the recent LNG price surge had lent weight to the argument for Scarborough, and if the trend continued through the next few quarters she was “incredibly confident we’ll be able to take a final investment decision in the second half of the year”.
“From a macro perspective it makes us feel more confident now that we see that so many projects have had to delay, and some of them have been delayed indefinitely,” she said.
“And also we see that a number of companies that are invested in these projects are really suffering from a balance sheet perspective – and Woodside is one of the very few companies involved in our sector that has held onto our credit rating throughout this. We’ve not dropped a notch, we’ve got strong liquidity, we’ve got a strong balance sheet, so all of those things bode very well for a final investment decision in the second half of the year.”
Woodside released its December quarter production report on Thursday, and chief executive Peter Coleman issued a bullish outlook for 2021 after January’s gas price surge.
“Oil and gas prices have strengthened considerably heading into the first quarter of 2021. We agreed to our highest ever spot LNG price for delivery in the coming quarter, surpassing our previous record set in 2012,” he said.
“Similarly, Vincent crude and Wheatstone condensate are also being priced at all-time record premiums to Brent, compounding the impact of the sharp increases in crude pricing and reflecting continued improving economic conditions in much of Asia.”
Woodside delivered record annual production of 100.3 million barrels of oil equivalent (mmboe) in 2020, with December quarter output of 24.9mmboe, down slightly from the previous period.
But the company signalled a fall in production this year, flagging annual output of 90 to 95 mmboe.
Rising prices in the December quarter delivered revenue of $920m, up 32 per cent from the September period – although still well down on the $1.4bn it booked in the same quarter in 2019.
Woodside said it received an average $47 per barrel of oil equivalent in the three months to the end of December, up from $23/boe, with domestic gas yielding an average $14/boe.
Received oil prices lifted $20/boe to $65.
Mr Coleman, who will leave Woodside in the second half of the year, said recent supply deals for cargoes from its Scarborough development indicated growing market support for the $16bn gas project.
Woodside said on Monday it had doubled the size of its offtake agreement with Germany’s Uniper, which will now take a million tonnes of liquefied natural gas a year from Woodside’s production portfolio, and 2 million tonnes from 2026 – with supply from 2025 conditional on a final investment decision in Scarborough.
Mr Coleman said the revised Uniper deal was “another sign of market support” for the project, as Woodside approaches a final investment decision on the project, and on an expansion of its Pluto processing facilities in WA, in the second half of 2021.
“Late in the quarter, the North West Shelf Project participants executed fully termed agreements to process third-party gas from Pluto and Waitsia, marking the first step towards securing the long-term future of Australia’s first and largest LNG plant as a tolling facility,” he said
Woodside shares closed down 45c, or 1.6 per cent to $26.95 on Thursday.