Revenue earned by Woodside Petroleum in the six months to June from sales of LNG, oil and other products plunged by just on a quarter from a year earlier as the company continued to battle of the two year slide in global prices.
That will see earnings fall, based on the lower revenue, but that drop will more than offset by the way Woodside has hacked into its investment and other spending (more than 500 jobs have been cut as well) in the first half.
Investors took all this in their stride and the shares rose 1% to $27.62 yesterday.
But there will be a pick up in sales revenue in the current quarter because lNG prices lag the world oil price, which rose strongly in the first and second quarters
Spending on investment fell to $US790 million from $US4.465 billion in the first half of 2015.
While Woodside slashed investment plans, much of the fall was helped by the end of spending on new projects and the deferment of the huge Browse Basin project off the NW WA coast.
Some of the savings have been spent (bolstered by bank debt) on the Apache assets in Australia and Canada, on work in Myanmar, on the Conoco-Phillips assets in West Africa (upwards of half a billion dollars) and small ($US2 billion or so) projects off the NW WA coast (such as Greater Enfield).
Sales revenue fell 24.1% to $US1.938 billion ($A2.6 billion) in the six months to June 30, against the $US2.556 billion in the first half of 2015.
Sales revenue dropped 16% to $US825 million ($A1.1 billion) for the three months to June 30 from $US982 million in the first quarter of 2016. It also rose slightly from the second quarter of 2015 (around a few million dollars to $US1.033 billion.
First quarter revenue of $US982.4 billion was down sharply from the $US1.407.7 billion in the March quarter of last year.
Woodside’s second quarter production fell 6.3% to 22.2 million barrels of oil equivalent (MMboe) from 23.7 MMboe in the first quarter of this year.
However, production in the second quarter of 2016 was up 10.4% on the same quarter of 2015 due to a refurbishment outage at Woodside’s Pluto facility the previous year.
Production for the six months edged up to 45.8 MMboe in the six months to June, from 41.9 MMboe in the same period of 2015. Sales rose to 45.37 MMboe from 43.4 MMboe.
In yesterday’s statement, the company said:
"Production and sales volumes were lower primarily due to reduced NWS LNG production resulting from the planned major turnaround campaign across the NWS facilities. Building on recent learnings, the NWS turnaround was delivered ahead of schedule,” Woodside said.
"Lower volumes were partially offset by higher Pluto LNG production due to high plant reliability and higher capacity during the cooler autumn/winter months. Sales revenue was lower primarily due to the lagging impact of Q1 oil prices on Q2 LNG contract prices.
"Higher oil prices in Q2 will result in higher realised LNG contract prices in Q3.
CEO Peter Coleman said in yesterday’s report that the business was performing well in a challenging external environment.
“We continue to deliver world-class operational excellence across our assets. This includes completing the North West Shelf Train 4 turnaround eight days ahead of schedule and making further improvements to annualised loaded LNG production at Pluto.
“On Greater Enfield we revamped the development concept and took advantage of market conditions to take an FID and estimate incremental cash costs of less than US$6 per barrel on average for the first five years of production.
“Lower sales revenue for the quarter largely reflects the three month lag in oil-linked LNG contract pricing structures. We will see higher realised LNG contract prices reflected in Q3. Our strong operating cash flow and balance sheet will continue to support business growth opportunities,” he said.
Woodside will report its interim earnings results on August 19.
