Woodside, Santos hit production peaks for oil and gas

Oil prices may have bottomed but there are signs production among local oil and gas firms may have peaked.

Santos has issued guidance pointing to a fall in its output in 2017.

Oil prices may have bottomed but there are signs that production among Australia’s big oil and gas companies may have peaked — at least for now.

Woodside Petroleum and debt-laden Adelaide producer Santos are scheduled to release their December quarterly production reports this week, shedding light on the health of their operations after an OPEC-inspired rally in oil prices towards the end of last year.

While that price recovery means Santos and Papua New Guinea liquefied natural gas producer Oil Search are expected to report increased revenues for the quarter, an expected decline in production at Woodside for the quarter has Goldman Sachs analyst Mark Wiseman tipping a drop in revenue from $988 million to $966m. Woodside’s output for the year as a whole is forecast by Goldman Sachs to hit the equivalent of 95.1 million barrels of oil for 2016, up from the equivalent of 92.2 million barrels in 2015, in part reflecting what was a strong year operationally.

The company is expected to announce its production guidance for the year ahead when it releases its latest numbers on Thursday, and Mr Wiseman expects Woodside’s output to fall from 95.1 million barrels to just 89.3 million barrels this year.

The fall in output expected at Woodside this year helps explain the company’s pursuit of a number of acquisitions in recent months.

It recently completed its $US440m acquisition of a stake in two oil discoveries off Senegal in West Africa as well as the $US250m purchase of interests in the big but remote Scarborough gasfields off WA.

Woodside also has a 13 per cent stake in the Wheatstone LNG plant being built in Western Australia that it bought in 2015 for $2.8 billion.

US oil and gas giant Chevron, the operator of Wheatstone, last October flagged a $US5 billion blowout in its cost estimates for the project and Woodside has previously indicated it could use this week’s quarterly to shed more light on how Chevron’s new expectations compared to its own existing outlook for the project’s final cost.

Wheatstone is currently scheduled to ship its first LNG by the middle of this year, although the ramp-up of large-scale LNG plants can be a slow process.

Meanwhile, Santos used its investor day late last year to issue guidance pointing to a fall in its output in 2017.

Goldman Sachs is also predicting a slight drop in Oil Search’s output.