Investors in Woodside Petroleum (WPL) accepted its assurances yesterday that it would not be hit by the $US5 billion blowout in the cost of the Chevron run Wheatstone export LNG project off the WA northwest coast.
The shares rose 0.3% to $28.41, despite a sell off in oil in Asia during yesterday as investors went negative (again) on the chances of agreement between major producers to cap production at the end of next month.
The wider market was up 0.6% by the close, or 34 points.
The 17% budget overrun, disclosed by Chevron chief financial officer Pat Yarrington to investors in the US on Friday night lifts the total cost of the project under construction to $US34 billion. Chevron also revealed a better than expected September quarter result (See separate story).
But Woodside said in yesterday’s statement that it had already updated its expectations of the project costs when it bought its 13% stake in Wheatstone last year, and noted the cost increase would lift its capex guidance from February by less than 8 per cent.
"The Wheatstone Project cost update includes significant costs to which Woodside has no exposure. The cost update referenced the original 2011 final investment decision budget estimate issued prior to Woodside joining the Wheatstone Joint Venture. Woodside updated expected costs as part of our 2015 acquisition of Apache’s interest in the Joint Venture,” Woodside said in the statement.
"Woodside is reviewing the cost update received from the Wheatstone Project operator after ASX market close on 28 October 2016. Woodside’s initial view is the cost update results in an increase in Woodside’s total capital costs of less than 8% in comparison to the guidance provided in February 2016.
“It is within the range of outcomes expected at the time of the acquisition of Apache’s interest in the Wheatstone Joint Venture and can be funded by existing cash and undrawn debt facilities,” Woodside said.
It added that it will provide forecast 2017 capital expenditure figures in the fourth quarter 2016 report to be released early next year. In a separate statement yesterday Woodside said its $US440 million purchase of a stake in a promising oil venture off Senegal in West Africa has been completed.
The transaction with US major ConocoPhillips, first announced in July, sees Woodside taking a 35% of the SNE and FAN oil discoveries off the Sengelese coast, with oil production there early next decade.
The SNE field is estimated by Woodside to hold about 560 million barrels of oil, and potentially more than 900 million. The partners face development of up to $US8 billion.
Woodside said the final purchase price for its acquisition of ConocoPhillips Senegal BV was $US350 million plus about $US90 million in adjustments. The total is $US10 million higher than the estimate given when the deal was announced in July.
