The Russian invasion has been very kind to Australian oil and gas groups – as we have seen with a bullish quarterly report and buyback and a huge rise in revenue (thanks in part as well to the Oil Search takeover) from Santos last week .
Yesterday we saw solid quarterly updates from Beach Energy and the industry leader Woodside. This time, however, the news was ignored as Woodside shares fell more than 5% and Beach shares were down 4%.
In both cases, the results didn’t impress investors who were too worried by the local continuation of last week’s weakness on Wall Street, the overnight drop in oil prices and fears that the mishandling of its growing Covid outbreaks would see the Chinese economy slow faster than expected and perhaps hit a demand-sapping recession later this year.
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Sales revenue for Woodside (ASX: WPL) almost doubled from a year earlier thanks to surging prices for oil and LNG, and the company sees better returns in the June quarter, which should set Woodside up for a barnstormer of a result for the June 30 half of 2022.
Woodside’s strong first quarter performance had been expected because of the trend established by other oil majors offshore and by Santos last week.
Woodside reported sales of $US2.355 billion in the March quarter, up from $US1.121 billion a year ago but down from the $US2.852 billion in the final quarter of 2021.
Revenue from LNG more than doubled from a year ago to $US2.043 billion from $US834 billion, oil revenue rose to $US296 million from $250 million and revenue from LPG sales dipped to $US16 million from $US33 million.
Production eased to 22.3 million barrels of oil equivalent in the latest quarter from 23.7 MMboe a year earlier thanks to weather problems and maintenance
Sales totalled 25.5 MMboe, almost steady with 25.7 MMboe a year earlier.
The average price for its oil and LNG was $US93 a barrel, more than double the $US44 a barrel a year earlier.
In yesterday’s statement, Woodside CEO Meg O’Neill said the Russian invasion of Ukraine had exacerbated already tight energy markets, particularly for LNG.
“This has resulted in unprecedented volatility and price spikes to levels not seen since the early part of last decade,” she said.
“Revenue was buoyed by a strong average realised portfolio price of $US93 per barrel of oil equivalent, despite overall lower sales volume due to reduced trading activity in the currently volatile global energy market.”
LNG purchased from other producers and sold by Woodside made up 14 per cent of sales in the March quarter, down from 23 per cent in the previous three months.
O’Neill expects Woodside to benefit from even stronger pricing in the June quarter as many of its LNG contracts are linked to the oil price three months earlier.
In three weeks, Woodside shareholders will vote at the company’s annual general meeting on the acquisition of BHP’s petroleum division.
Woodside shares fell more than 4% to $30.60 on fears Asian demand for LNG might fall if Covid hurts Chinese demand.
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Beach Energy (ASX: BPT) saw revenue jump 15% in the three months to March on higher oil and gas prices as the company rode the global rise in energy prices.
The Kerry Stokes-dominated company (his Seven Group Holdings is the largest shareholder with around 30%) said production eased 3% below the prior quarter to 5.2 million barrels of oil equivalent (MMboe) “due to rain delays to Cooper Basin workover activities and planned maintenance downtime in the Bass Basin.”
But the rise in global oil and gas prices which were given a real boost with the Russian invasion of Ukraine which saw third quarter sales revenue of $458 million, up 15% mainly due to higher realised oil prices (up 51% to $A176/a barrel (bbl) and higher realised gas prices (up 10% to $A8.40/gigajoule), offset by lower production and one less oil lifting (shipment).
Beach said the fall in oil output from its once highly touted Western Flank area in the Cooper Basin is now expected to be 35% – “previously 35% to 45% due to refined reservoir management strategies”. In other words, finding ways to get more oil out of the rock and slow the fall.
Beach said it had $600 million of liquidity at the end of March and a “fully funded Balance Sheet to deliver major growth projects”
The capacity of its Otway Gas Plant increased following connection of Geographe 4 and 5 wells which will give “increased capacity to support higher winter customer demand, as required, with average supply of 152 tetrajoules (TJ) a day subsequent to quarter-end (Q3 FY22: 77 TJ/day).
The company said its major growth projects were tracking on schedule and on budget.
The Thylacine West 1 was successfully drilled in the offshore Otway Basin “with net pay above pre-drill estimates; remaining two wells of the four-well Thylacine campaign expected to be drilled in Q4 FY22.”
The Waitsia Stage 2 Perth Basin development drilling campaign commenced; with the first of six wells drilling ahead. A LNG Supply and Purchase Agreement with BP progressing with expectation of signing in the final quarter of this year.
Beach said it had made the Final Investment Decision to connect the Enterprise gas project to the Otway Gas Plant in second half of 2023 financial year.
Successful three-well oil appraisal campaign in the Martlet Field (in the Cooper Basin) expected to increase reserves and one commercial oil discovery from the Western Flank exploration campaign thus far.
Beach shares eased nearly 4% to $1.59. Like Woodside shares, they fell because of the weakness in global oil prices on fears Chinese demand might weaken as the Covid pandemic takes a new whack at the economy.
