Woodside Petroleum’s sales slide 47% as gas trades near five-year low

By JAMES PATON
Bloomberg

Woodside Petroleum’s sales fell by almost half in the second quarter amid falling energy prices and lower output of liquefied natural gas (LNG).

Revenue at Australia’s second-biggest oil and gas producer dropped 47% to $898 million, the Perth-based company said Thursday. That compares with Goldman Sachs Group’s estimate of $924 million.

Woodside is among LNG producers grappling with prices in Asia that are trading near the lowest in five years. Prices for the fuel have tumbled in the past year as new supply combined with weakened demand in key markets such as Japan, Korea and China. Production last quarter was lower mainly because of maintenance at the Pluto liquefied natural gas project, the company said.

“It’s a tough time to be marketing incremental LNG volumes,” said Nik Burns, an analyst at UBS Group in Melbourne. “There is an oversupply at the moment with the number of Australian and US projects coming on line in the next two, three, four years.”

There are LNG projects on the drawing board in countries ranging from the US to Australia. Woodside, operator of the Pluto and North West Shelf developments in Western Australia, is planning further projects, including the Browse venture with Royal Dutch Shell.

Woodside expects to make a decision on whether to proceed with Browse in the second half of 2016, it reiterated Thursday. Shares in the company slipped 1.1% to A$34.57 in Sydney trading, taking their decline for the year to 9.1%.

LNG Rebound

While Woodside and other producers have been hit by lower prices, “we are forecasting LNG pricing to rebound from here, and we expect that to translate into higher LNG revenue,” Burns of UBS said.

LNG prices in Asia have fallen almost 30% in the past year to $7.75/MMBtu, according to data from Energy Intelligence Group. Brent crude has fallen more than 45% over that period.

“Second-quarter revenue declined significantly with both lower production and realized commodity prices,” analysts at Sanford C. Bernstein & Co. said in a report.

Woodside’s production in the quarter fell about 15% to 20.1 million bbl of oil equivalent. Goldman Sachs had expected 20 million bbl.

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