Mixed bag for Woodside

WOODSIDE has chalked up an underlying after-tax profit of $A865 million for the half year, a 4.5% increase but shareholders hoping for Pluto expansion-enabling news from Ananke-1 had best look away now.
Mixed bag for Woodside Mixed bag for Woodside Mixed bag for Woodside Mixed bag for Woodside Mixed bag for Woodside

While the major also reported in with a 7.2% increase in production for the half to 34.2 million barrels of oil equivalent, Woodside chief executive Peter Coleman told the market that the current exploration campaign in support of a Pluto expansion was not successful.

"With regard to Pluto expansion, the current phase of exploration drilling to support additional trains has concluded without discovering the volume of commercial gas that is required," Coleman said.

"Therefore a break in the drill program is required to allow a thorough evaluation of the well results and to rebuild the portfolio."

He also mentioned that discussions with third party gas holders would continue through 2013, signalling that Woodside may take its time on selecting the best option for any Pluto expansion.

However, Woodside will be given ample motivation to expand the project, given Pluto's positive performance so far.

Woodside said eight cargoes, representing 599,564 tonnes of LNG and 513,083t of condensate, had been shipped from the project since start-up in April until the end of June.

Of the eight cargoes, three were sold onto the spot market as a result of the unexpected high level of production. It said cargoes sold onto the spot market attracted a higher premium than contracted volumes.

Shipments from Pluto was one of the key drivers of Woodside's balance sheet position, which chief financial officer Lawrie Tremaine this morning told analysts gave it "flexibility options" should one of its planned projects not come off.

"We're not under pressure to mandate projects and should growth be delayed or our investment criteria not be met the company's strong balance sheet places us in a great position to return cash generated by the business to shareholder," he said.

Coleman backed up the sentiment.

"It really goes without saying that we like the look of our balance sheet. It's a balance sheet that does give us plenty of options," Coleman said.

Meanwhile, Woodside continues to play a straight bat on speculation surrounding the Browse development's future, with Coleman telling analysts and media that it was still determined to get to a "decision point" before final investment decision in mid-2013.

"The Browse development is currently in the assurance phase and we've received all tendered bids for the upstream and downstream," Coleman said.

"We have an evaluation process underway to determine project cost and economics so we're in a position as a joint venture to make final investment decision in 2013 in line with our retention lease conditions.

"The key on Browse is that we have under our retention lease conditions to take James Price Point through to a decision point. We're on track for that.

"We've completed most of the geotechnical work we needed to do onsite, we do have tenders in hand and those tenders are a huge piece of work.

"They're in five different currencies and many thousands pages of documents, so we'll work through them this year and we have assurance processes with the JV."

Speaking on Chevron's decision to exit the JV, Coleman chose to focus on what Shell could bring to the table rather than what Chevron took away.

"We're pleased to have Shell taking a greater interest in Browse because Shell are the global leader in LNG. So for a company like Shell to take a large piece of the project like this given their global technology capabilities in this area … we see that as a real positive," he said.

However, he played down suggestions that Shell was hell-bent on developing Browse away from the controversial JPP but left a little bit of wiggle room for speculation.

"They're committed to going through the James Price Point process and they know that," he said.

"What I'll tell you though is that clearly it brings options for us. In that regard I think Shell being able to bring those options to the table and that brings alternative for us as we go down the path into the future.

"But James Price Point is clearly the base case."

It also gave its standard line on Sunrise, telling the market that it would continue to work with the Timor-Leste government on coming to a mutually beneficial dialogue.

However, earlier this month freshly sworn-in Prime Minister Xanana Gusmao told Parliament of his desire to bring the gas onshore, seemingly delivering a blow to any hope Woodside had of developing the project offshore.

"The government is committed to bringing the pipeline from the Greater Sunrise field to the south coast of Timor-Leste," Gusmao said.

"Let's prove to the world that a pipeline to Timor-Leste is a safe and economically viable solution and that our horizon is the development of a petroleum industry able to provide direct economic dividends for our population."

In other news, Woodside maintained its beefed-up production guidance of 77 million barrels of oil equivalent to 83MMboe on the back of faster than expected start-up at Pluto.

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