Woodside Petroleum managed to align higher production and rising oil and gas prices in the June quarter and it paid off.
The improvement has boosted Woodside’s likely first half profit which could be up as much as 50%, based on early indications from the sales revenue and expenditure figures provided yesterday.
That sort of improvement will go someway to reassuring investors after the company’s reputation took a hit from the delays and cost blowouts at its Pluto LNG project in WA.
Woodside yesterday reported production of 16.3 million barrels of oil equivalent (mmboe), up 4% on the March quarter when volumes from the Vincent oil field offshore Western Australia were curbed by a planned maintenance outage.
Compared to June quarter 2010 output of 17.5 mmboe, however, production was down 7%, due largely to natural oil field decline and the outage of NWS oil fields related to the $1.8 billion NWS Oil Redevelopment Project.
Sales rose in the June quarter to 16.282 million barrels of oil equivalent, from 15.276 in the March quarter, but they were down on the 17.262 million barrels of sales in the March quarter of last year.
But revenue of $US1.254 billion ($A1.19 billion) for the June quarter jumped a fat 26% from March and 17% from the same quarter in 2010 as higher oil prices kicked in (although they did fade from mid-May onwards).
Investors liked the news and sent the shares up 67c, or 1.7%, to $38.92, a solid performance on a day when the market went sideways and ended down a few points.
Also helping was a clear sign that the company will not be rushing to expand the Pluto LNG project until it has better controls on costs.
Woodside said the higher revenue was "primarily as a result of higher sales volumes from the Laminaria- Corallina, Enfield, Vincent and Stybarrow oil fields, together with increased commodity prices".
The output improvement was also driven by strong liquefied natural gas (LNG) production at Woodside’s flagship North West Shelf (NWS) operations near Karratha.
The redevelopment project flagged last month includes the installation of the Okha floating production, storage and offloading facility, and resulted in Woodside downgrading its 2011 production target to between 62 and 64 mmboe, which it repeated yesterday.
For the six months to June, revenue was up around 12% at $US2.252 billion from $US2.102 million for the first half of 2010.
Sales for the six months to June 30 were 31.661 million barrels of oil equivalent, down from the 35.996 million for the same period of 2010.
Woodside said expenditure in the latest half year was $US1.588 billion, down $US90 million from the $US1.698 billion of the first half of last year.
That left a surplus from revenue of $US664 million, up 50% from the $US404 million in the six months to June 30, 2011.
Earlier this year, Woodside expected its full year output, excluding volumes from the much-delayed Pluto LNG project, would be between 63 and 66 mmboe.
Woodside yesterday reiterated it expected to start LNG exports from the Pluto project in March 2012.
Ratings agencies Standard & Poor’s and Moody’s Investors Service last month put Woodside on review for a possible credit downgrade after it revealed further cost blowouts and delays at Pluto.
Costs had blown out to $14.9 billion – 25% above original estimates – and the expected first LNG shipment will be 15 months late, forcing Woodside to buy spot cargoes to meet contractual arrangements from later this year.
The company indicated yesterday that it would be taking more time to decide on the expansion phase at Pluto and was working on update reserves estimates, among other things.
Woodside will report its first-half earnings on August 17.
