Australia's Woodside posts highest H1 oil, gas production volume

Sydney — Australia's Woodside recorded its highest oil and gas production level for the first half of the year at 50.1 million barrels of oil equivalent, a 28% year on year increase, despite maintenance shutdowns and tough markets, although low energy prices meant higher output didn't translate into higher revenue.

The corresponding production was around 39 million boe for the first half of 2019, and its previous high was 45.9 million boe in the first half of 2016, Woodside said in its half-year report for 2020 released on Aug. 13.

Woodside's spot LNG sales were higher than planned, accounting for 46% of the total in April-June rather than the 21% that was expected, Chief Financial Officer Sherry Duhe said on a conference call.

"[O]ur customers were dealing with weak demand, high levels of uncertainty and a large spread between contract and spot prices," she said. "So, they were incentivized to exercise some of their limited contract volume flexibility options, which further increased our exposure to the spot market," she added.

For the January-June half, spot volumes accounted for 31% of total LNG sales, equal to 19 LNG cargoes, 17% of which were planned, 9% were driven by customer flexibility and 5% by increased production, Woodside said.

"We're optimistic that the worst of the external demand and supply shocks are behind us," Chief Executive Peter Coleman said, after what he described as the most difficult market conditions seen in the industry in nearly four decades.

"We don't expect further exercise of contractual flexibility through the rest of the year and we expect spot sales to make up about 25%-30% of our full-year LNG sales accordingly," Duhe said.

RBC Capital Markets analyst Gordan Ramsay said the spot LNG sales guidance is higher than he expected and "highlights an ongoing imbalance in Woodside's LNG sales book with a relatively high level of weak spot LNG pricing equivalent exposure relative to its Australian E&P peer group."

Woodside commenced hedging activities in the first quarter of 2020 and hedged the price of 13.4 million barrels of oil production at a minimum average sales price of $33/b, including options, which allows it to benefit if monthly oil price averages above $40/b.