Australia’s biggest oil and gas exporter, Woodside Petroleum, has bowed to the pincer squeeze of lower prices and declining demand to delay an estimated $32 billion in project development and maintenance work.
The cutback had been widely expected by investors who rubbed a modest 3% off Woodside’s share price after the announcement earlier today.
Low oil and gas prices have forced Australia’s Woodside Petroleum to defer expansion plans. … [+]
Most of the damage to the company’s stock-market value was done in February and early March as Woodside’s share price fell by more than half from $21 to a 16-year low of $9 earlier this week, before starting a recovery which ended with the project deferral announcement.
Three LNG Projects Deferred
The major projects affected by what the company calls a “response to market conditions” are two proposed new liquefied natural gas (LNG) developments, Scarborough and Browse, as well as expansion of the existing Pluto LNG project.
Those three LNG developments were scheduled to be the subject of final investment decisions (FID) over the next 12 months.
The chief executive of Woodside, Peter Coleman, said in a statement that changes to the company’s work plans would result in a 50% cut to forecast 2020 expenditure.
Extraordinary Times
“These are extraordinary times, that no-on could have foreseen,” Coleman said.
Woodside Petroleum chief executive, Peter Coleman. Photographer: Sergio Dionisio/Bloomberg
“Woodside enters this period of significant uncertainty with one of the stronger balance sheets in our industry and world-class, low-cost producing assets, which are resilient to commodity-price fluctuations.”
The cost-saving cutbacks on expansion work, and the stretching out of maintenance schedules, is not expected to effect Woodside’s 2020 production which remains at guidance levels of between 97-and-103 million barrels of oil equivalent (a combination of oil and gas).
Coleman said Woodside, as at February 29, had $4.9 billion in cash on hand and total liquidity of $7.9 billion. Gearing stood at at 13.8%.
Earnings Hit To Come
The company warned that there would be hit to earnings which, given the time delay on LNG sales, is expected to be felt late in the June quarter.
A flicker of good news in today’s announcement was a pick up demand for LNG in China, the country first into the coronavirus slowdown and appearing to be the first to emerge.
Coleman said his LNG trading team had recently begun placing some spot (short-term) LNG cargoes into China as industrial output and demand restarts.
