Was the 2014 result for Woodside as good as it gets as the slide in oil and gas prices will almost certainly carve great chunks out of the 2015 revenues and earnings for the country’s major listed energy group?
Woodside confirmed 38% jump in full-year net profit on the back of record revenues and said it would now be looking to cut costs and spending and finding greater efficiencies in its business given “challenging” market conditions caused by the slide in oil prices.
Full-year profit rose to $US2.41 billion, from $US1.74 billion in 2013. Underlying net profit increased by 42% to $US2.42 billion, shy of forecasts of $US2.57 billion.
Woodside declared a record final dividend of $US1.44 per share, higher than many analysts were anticipating and 40% higher than a year earlier.
That took the final to a record $US2.55, up 2% from the $US2.49 paid in 2013.
Revenue climbed 25% to $US7.44 billion.
The shares rose 4.4% to $36.45 as world oil prices again rose yesterday. The results were well ‘in the market’ and not a surprise.
WPL 1Y – Woodside profit jumps 38%
Write-downs of existing producing assets (mostly due to field depletion) totalled $US434 million before tax. They were limited to impairments of near-term oil production assets rather than to longer-dated LNG ventures.
CEO, Peter Coleman said in the statement accompanying the profit report “Our 2014 reported profit increased 38 per cent on the previous year, reflecting record production and higher realised prices. Our focus on lowering cost structures is evidenced in unit production costs decreasing. Continuous improvement in driving business efficiencies will remain our priority in the current challenging market conditions,” he said.
He said the company had significantly progressed its global growth strategy throughout the year, re- balancing its exploration portfolio, developing marketing and trading opportunities and through the proposed acquisition of key Apache interests.
“We have made significant progress in building our global exploration portfolio in emerging petroleum provinces in parallel with increasing supply optionality for customers. The world-class Wheatstone, Balnaves and Kitimat interests will provide value-enhancing opportunities that complement our existing portfolio,” Mr Coleman added.
"Our focus on lowering cost structures is evidenced in unit production costs decreasing," Mr Coleman said.
"Continuous improvement in driving business efficiencies will remain our priority in the current challenging market conditions."
Woodside said it delivered $US560 million in productivity improvements in 2014 and said there was "more to come" in 2015. The cuts in 2014 included 320 job losses. The company revealed cuts to 15% to 20% in exploration, development and investment spending this year (leaving aside the $US3.75 billion deal to buy Australian and Canadian assets from Apache, the US independent).
The company restated its 2015 production target of 84 million-91 million barrels of oil equivalent, down from the record 95.1 million in 2014.
While production from Apache’s stake in the Balnaves oil field and the Kitimat gas venture in Canada should add a further 3 million-4 million boe It won’t be releasing updated projections until after the deal has closed, Woodside told the ASX yesterday.
Investment expenditure in 2015 is now expected to be about $US6.2 billion, but that includes the Apache acquisition and spending on the Wheatstone LNG project. In the company’s base business, spending has been cut by 20% from the original plans because of the drop in oil prices, to $US1.1 billion.
“The current low oil price environment may continue for an extended period,” Woodside said. That was a point supported yesterday by global giant, BP in its latest energy outlook when it forecast the current level of prices could continue for some time yet.
”The current weakness in the oil market, which stems in large part from strong growth in tight oil production in the US, is likely to take several years to work through,” the group’s report said.
That’s why the 2014 result for Woodside and all other oil and gas groups will be the peak for some time to come.
