The slide in oil prices and foreshadowed asset impairments took their expected toll on the earnings of Woodside Petroleum (WPL) in 2015.
But the shares also got caught up with the market disappointment at the latest non-starter of a story about an OPEC production cut (it was a badly thought out freeze idea with no chance of working).
So the shares slid 7% to $27.49 on the ASX yesterday.
WPL 1Y – Woodside on the slide
Write-downs triggered by the oil price slide almost wiped out Woodside Petroleum’s 2015 profit, with already flagged heavy impairments confirmed, especially on the oil and gas assets in Australia and Canada only recently acquired from US energy independent, Apache. (over paid)
Net income slumped 99% to just $US26 million ($A36.6 million), while core net profit dropped by more than $US1 billion to $US1.126 billion.
While that was better than most market forecasts of just over $US1 billion, investors also focused on the weakness in global prices in the wake of the silly agreement between the Saudis, Russia and a couple of other producers for a freeze – one that would only work if the likes of Iran and Iraq are involved (they aren’t), and a deal that would cheer the under pressure US shale oil and gas sector.
Woodside CEO Peter Coleman said the core result reflected Woodside’s resilience to low oil prices.
“Woodside, with its low cost of production, is well positioned to withstand this commodity cycle,” he said in yesterday’s announcement.
Woodside warned last month that it would take impairments of between $US1 billion and $US1.2 billion before tax after cutting its oil price forecasts for both in the short and long term.
The write-downs in the end totalled $US1.083 billion pre-tax, with the biggest impairment, of $US865 million, on the stake Woodside acquired from Apache in Chevron’s $US29 billion Wheatstone LNG project under construction in Western Australia, a deal that was struck when prices were higher.
Chevron said last month that Wheatstone is running six months late and will now only start production in mid-2017, hence the write down.
Oil assets were also written down, including the Balnaves oil project also acquired from Apache, the North West Shelf oil venture and others. Woodside also took a $US128 million charge for an "onerous lease" related to Balnaves.
In line with the 80% payout ratio, Woodside declared a final dividend of US43 cents a share, down from $US1.44 a year earlier.
Woodside repeated its 2016 production target of between 86 million and 93 million barrels of oil equivalent (mboe), the mid-point of which is slightly down on last year’s output of 92.2 mboe.
