2017 could be a rough year for shareholders in Woodside Petroleum (WPL) – not from the continuing volatility in world oil prices, but from a year of sliding production before an upturn arrives in 2018 to halt the rot.
Woodside Petroleum told the ASX yesterday in its 4th quarter production report that it lifted 2016 full-year production 3% to 94.9 million barrels of oil equivalent (Mboe), hitting its guidance of between 92 and 95 Mboe. But it has forecast a 5% plus slide in expected production this year to between 84 and 90 Mboe.
But the company says it has several projects that will soon begin adding growth, offsetting any decline in other parts of the business, said Chief Executive Peter Coleman. That’s even as Woodside remains on the lookout for further undeveloped oil-and-gas assets that will bolster its reserves, he said in an interview.
At the heart of the expected growth is Chevron US$34 billion Wheatstone export LNG project, which is expected to produce its first liquefied natural gas midway through the year from a first production line and then add a second line early next year.
The project, which saw Woodside become a shareholder in 2015, will also sell natural gas to the domestic market in Western Australia from 2018 (as the NW Shelf project of Woodside has been doing for decades).
Woodside also expects to add output from the $US1.9 billion Greater Enfield oil development with partner Mitsui Australia in mid-2019.
“The degree of growth will be a function of how quickly the projects start up and how reliable they are,” CEO Peter Coleman said yesterday.
Woodside says its LNG volumes are likely to build on a record level last year, but will be offset by a decline in oil output and a drop in domestic natural gas as its equity stake in pipeline volumes from the North West Shelf project falls as planned.
In WA, Woodside has stakes in the North West Shelf LNG project, which has been operating since 1984, and the Pluto LNG plant that began producing in 2012. It did a US$2.8 billion deal in 2015 with Apache Corp of the US that includes a 13% stake in the Wheatstone project, as well as interests in the Kitimat LNG project in Canada.
Mr. Coleman said that over the last two years the company had added the equivalent of 20 years production to its resources base with assets across offshore Western Australia, Kitimat and with $US350 million deal last year to buy ConocoPhilips’ (COP) interest in three promising oil discoveries off Senegal.
Mr. Coleman reckons said still is a chance for the company to add to its portfolio by picking up up oil-and-gas assets this year unwanted by other companies still cost cutting.
Woodside said 4th quarter revenue fell to $US1.079 billion from $US1.25 billion in 2015. For the year as a whole, revenue fell by around 20% in 2016 to $US4.075 billion from $US5.03 billion in 2015.
A key factor in the company’s 2016 profit performance will be a $US250 million shortfall in capex spending last year which totalled $US1.4 billion. That should soften the impact of the slide in revenue.
