Oil price taking its toll at Woodside
January 15, 2015 , Angela Macdonald-Smith
The tumbling oil worth is set to take a toll at Woodside Petroleum which has steered of spending cuts and as much as $US400 million ($488 million) of write-downs regardless of reporting record gross sales for 2014 which should provide for a wholesome final dividend next month.
The sales figures of $US1.seventy six billion for the December quarter were generally consistent with the expectations of analysts, who alternatively are warning that the February 2015 payout would be the remaining of the good occasions sooner than the influence of the give way in oil costs hits dwelling.
“If investors want to seem backwards and take a look at the result it was a reasonably positive end result, with positive implications for 2d half of 2014 cash and dividends,” said americaenergy analyst Nik Burns.
“but everyone is now having a look ahead and in the new world of lower oil prices it’ll be difficult from an salary point of view for Woodside.”
Woodside shares sank as a lot as 1.8 per cent to $34.90, despite a moderate restoration in oil prices in a single day Australian time. The shares under-carried out the 0.8 per cent dip in the benchmark power index.
In its quarterly record on Thursday the native oil and fuel main additionally stated a step backwards at its Browse floating LNG venture, pronouncing that a joint marketing settlement for LNG signed virtually three years ago with venture partners Mitsui and Mitsubishi had been scrapped. The alliance had didn’t yield any LNG sales contracts for Browse.
The ditching of the settlement follows the December determination through Woodside to lengthen the goal date for beginning engineering and design work on the Browse challenge via six months to mid-2015. Many available in the market doubt that revised timetable can be met given the plunge in oil prices that is checking out the economics of the floating challenge, anticipated to cost more than $US40 billion.
“this is in keeping with our view that Browse is having a look troublesome in the interim,” Mr Burns said.
“Given they have been explicitly marketing Browse volumes and with Browse being deferred it comes as no shock that they’ve cancelled that deal.”
Woodside did however have some more positive information on LNG advertising, revealing an preliminary accord to promote 0.fifty six million tonnes a yr to Pavilion gasoline, owned by using Singapore sovereign wealth fund Temasek, over 13 years beginning in 2020. The deal is not linked to any explicit LNG challenge and displays Woodside’s move towards increase an LNG trading business, which would promote each its personal gas and fuel sourced from third events.
Brent crude oil prices have more than halved because June amid an oversupply thanks to rising US shale beverages manufacturing which the service provider of Petroleum Exporting international locations has refused to catch up on by means of reducing output.
The fall down in oil prices is anticipated to be behind the write-downs that Woodside flagged for its assets for the full-12 months, which it put at between $US250 million and $US400 million before tax, or as so much as $US170 million after tax.
alternatively the write-downs won’t affect the profit figure used to calculate Woodside’s 80 per cent dividend payout ratio, while an sudden petroleum royalty rent tax advantage of as much as $US90 million for the year, printed within the quarterly, will be taken into consideration.
“All issues being equal we might expect consensus 2nd 1/2 2014 earnings and subsequently dividends to be higher submit this announcement than earlier than,” Mr Burns stated.
“however then going ahead we’re falling into the abyss of decrease oil costs that allows you to flow into salary in 2015 and subsequently dividends so it looks as if 2nd half of 20145 earnings and dividends will be the easiest we will are expecting for relatively some time.”
Woodside mentioned the slumping price has caused it to revise its 2015 capex, which it had flagged ultimate 12 months should moderate about $US2 billion.
“In mild of the present challenging market prerequisites which has seen crude oil pricing decrease from over $US100 per barrel in September 2014, to around $US55 per barrel at the beginning of January, Woodside is assessing the impact on close to term profitability and money flows, and revising investment expenditure subsequently,” the corporate mentioned.
The hit to spending, if you want to be specific in the full-yr outcomes on February 18, is predicted to be targeted in exploration, which Woodside had signalled last yr should elevate this 12 months.
but the tumbling oil worth had a reasonably gentle influence on Woodside’s December quarter sales, which still climbed 6.9 per cent from the yr-past quarter but slid 10.1 per cent from the September quarter. The revenues introduced full-12 months gross sales to $US7.08 billion, up 22.5 per cent.
manufacturing for the December quarter was zero.9 per cent up on the identical quarter in 2013, at 23.four million barrels of oil an identical (boe).
Woodside for the primary time gave a particular target for 2015 production, of between eighty four million and ninety one million boe, down from the ninety five.1 million boe recorded for 2014. It urged that a scheduled one-month shutdown of its $15 billion Pluto LNG project would reduce output by about three.4 million boe from 2014 while declining oil fields would account for every other 2.2 million boe reduction.
The 2015 production guidance does now not alternatively take note the acquisition of the Balnaves oil venture in WA that is a component of Woodside’s $US2.75 billion handle Apache employer that was once introduced in December and has but to complete.
On the exploration entrance, the quarter used to be disappointing with Woodside reporting that two wells drilled within the Outer Canning Basin had failed to find fuel, while a 3rd is still in growth.