Woodside Petroleum posts 27% fall in underlying first half profit
Woodside’s first half underlying profit sank 27pc as lower energy prices took the shine off record LNG production.
Woodside Petroleum is poised to pounce on a string of M&A opportunities as the gas producer looks to recover from a record $US4.1bn ($5.7bn) first half loss sparked by the worst oil market conditions seen in 40 years.
The gas giant is weighing a series of deals including Chevron’s stake in the North West Shelf LNG plant, a further 40 per cent share of the $US4.2bn Senegal oil development, with other assets likely up for sale as European majors quit oil and gas projects amid a shift to cleaner energy.
Chevron has kicked off the NW Shelf sale with bids due later this year and Woodside is seen as being in a prime position to double its one-sixth holding in the project which it operates.
“Obviously we know this asset very well, so we know exactly what we think it’s worth and all the nuances around it. It makes it easy for us to evaluate the opportunity,” Woodside chief financial officer Sherry Duhe said.
The producer also has an option to pre-empt Lukoil’s purchase of a 40 per cent stake in its Sangomar venture in Senegal from joint venture owner Cairn Energy, with another 10 days to make a decision, along with an option to acquire FAR Ltd’s share.
Moves by BP, Shell and Total to retilt their businesses may also spark opportunities with Woodside prioritising assets where it has majority control.
“Our preference is obviously things closer to home, if we can build things around existing assets. Then of course we‘ll do that. But equally, we recognise that we are very concentrated geographically in our footprint and diversification of that would assist us,” Woodside CEO Peter Coleman said.
“Anything that is a heavy capital requirement is not going to be added to the portfolio, because simply, we’ve already got some of that. Control, is really, really important when prices are low or recovering.”
Woodside’s net loss for the June half was triggered after it recorded $US4.37bn in pre-announced writedowns amid a torrid six months for the global oil and gas industry as demand cratered from the COVID-19 pandemic.
Mr Coleman said the ructions that had roiled the market were the worst he had experienced in a 40-year career, describing the crash as a perfect storm which it was only now starting to dust itself off from.
“I would rate the external conditions created this year by the COVID-19 pandemic and oversupply in global oil and gas markets as the most difficult I’ve seen in nearly four decades in the industry.”
Underlying net profit after tax fell 27 per cent to $US303m, beating a consensus estimate of $US281m, but significantly down from $US419m for the six months to June 30. Revenue dropped 15 per cent to $1.91bn despite record production of 50.1m barrels of oil equivalent.
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The Perth producer will pay a US26c per share dividend for the first half compared with US43c a share consensus.
Woodside shareholder Aberdeen Standard Investments said the company pulled off a strong operational performance but was ultimately subject to tough market conditions over the half.
“Operationally I thought it was a really solid result in terms of production, costs, break-even and the balance sheet. But it was the unprecedented market conditions which have really impacted,” Aberdeen investment manager Camille Simeon said.
Some of Woodside’s LNG customers declined to take contracted gas cargoes in the second quarter in favour of buying supplies more cheaply on spot market.
“We’re dealing with weak demand and high levels of uncertainty and a large spread between the contract and spot prices, so they were incentivised to exercise some of their limited contract volume flexibility options which further increased our exposure to the spot market,” Ms Duhe said.
Woodside had previously highlighted the weakness of the LNG spot market after revealing it sold nearly half of its LNG in the June quarter at a price nearly two-thirds less than the amount received for its contracted gas sales.
The shares fell 0.92 per cent, or 19c, to $20.40.