Woodside, Santos cash in amid gas boom
Australia’s two biggest energy producers have been banking huge profits off the back of soaring oil and gas prices.
Australia’s two biggest energy producers, Woodside Energy and Santos, have cashed in with soaring third-quarter revenues amid a price boom for oil and gas.
Woodside lifted its annual production guidance after delivering a 70 per cent jump in third-quarter revenue on higher gas prices, while Santos delivered record sales following its $21bn takeover of rival operator Oil Search.
Australian LNG and coal producers have been raking in huge profits after Russia’s invasion of Ukraine created havoc in international commodity markets, sparking calls for Labor to consider following the UK in creating a windfall tax to ease cost of living pressures for households.
Woodside chief executive Meg O’Neill said an energy crunch was creating huge demand for gas supplies.
“The market conditions obviously have been quite positive for us. In the oil markets — while there has been a bit of volatility — we are seeing economic activity around the world pick up and that’s driving demand for oil and oil products,” Ms O’Neill told The Australian.
“LNG has really been a fascinating story and the LNG market was tight, even before Russia’s invasion of Ukraine. And as we’ve seen Russian pipeline supply to Europe fall away over the course of the last six months, that’s driven demand for LNG up and LNG has been tremendously strong for the last six months.”
The West Australian operator, which merged with BHP Petroleum in a $40bn deal, expects to deliver production in a 153-157 million barrel of oil equivalent range from the previous guidance of 145-153m boe.
“Woodside surprised to the upside for the second time in 2022,” Credit Suisse analyst Saul Kavonic said. “The production upgrade is a triple positive as it also indicates Woodside may have moved to a more conservative reporting basis and a under promise, over deliver approach.”
Woodside delivered record production of 51.2m boe in the September quarter, up 52 per cent from the prior three months, driving a large bounce in revenues to $US5.8bn compared with $US3.4bn previously.
It achieved an average price of $US102 per barrel of oil equivalent while its average LNG price of $US32.70 per million British thermal units was the equivalent of $US207 per boe.
Its Scarborough and Pluto-2 expansion was 21 per cent complete at the end of September with first LNG expected in 2026.
Woodside kicked off a strategic review at its half-year results in August with analysts suggesting it could lead to asset sales including deals for its Australian oil assets.
Ms O’Neill pointed to its exit from the Orphan Basin exploration licences offshore eastern Canada as a decision taken from the strategic review.
The merger catapulted the company into the top 10 oil and gas producers in the world with assets spread through Australia, the Gulf of Mexico and Trinidad.
Woodside’s first big decision as a unified company will be whether to give the go-ahead on its $US5bn Trion oil discovery in the Gulf of Mexico, with Woodside saying on Thursday it continued to target a potential final investment decision in 2023.
Meanwhile Santos boosted third quarter production and delivered record sales following its $21bn takeover of rival operator Oil Search amid high oil and gas prices.
The South Australian company delivered a 2 per cent increase in production to 26.1 million barrels of oil equivalent while sales revenue lifted 15 per cent to $US2.15bn ($3.4bn) on the prior quarter. Revenue so far this year jumped 86 per cent to $US5.9bn with the company recording free cash flow over $US1bn.
The LNG price for the quarter of $US16.76 mbtu represented a 13 per cent lift on the prior three months while its average price for gas on Australia‘s east coast soared 40 per cent to $US8.96 per gigajoule from $US6.42GJ.
Santos said drilling on its Pikka oil project in Alaska is due to start in the second quarter of 2023 while it expects a court appeal on its Barossa development in the Northern Territory to take place in mid-November.
Santos chief executive Kevin Gallagher said Australia had an important role to play delivering reliable energy amid the fallout from Russia’s war with Ukraine which has led to a supply crunch and soaring prices for LNG and coal globally.
“Energy security is a top priority for countries in our region. Given the ongoing strong customer demand for our product now and into the future, Australia’s role as a major energy-producing nation has never been more important,” Mr Gallagher said.
Woodside jumped 6.2 per cent or $2.01 to close at $34.56 while Santos rose 2 per cent or 15c to $7.53.
