PERTH Feb. 21, 2007 (Dow Jones Newswires)
Australia's Woodside Petroleum Ltd. (WPL.AU) said Wednesday that it will resume work on the Sunrise liquefied natural gas project in the Timor Sea, reviving hopes of a multibillion dollar export venture.
The new dawn for Sunrise, stalled since late 2004 because of a political impasse between Australia and East Timor, overshadowed news of Woodside's 29% boost in 2006 net profit on the back of rising production.
Chief executive Don Voelte said output will rise by at least 6% to 72 million barrels of oil equivalent this year despite another downgrade to the 2007 forecast because of operational problems.
Australia's biggest dedicated oil and gas producer, Woodside is trying to diversify from its core North West Shelf asset by building new oil and LNG projects.
Sunrise, located 150 kilometers south of East Timor's coast, is a long-mooted LNG development estimated to hold about eight trillion cubic feet of gas and about 300 million barrels of oil.
But Woodside mothballed the project in November 2004 because of the arguments between East Timor and Australia over revenue sharing.
Voelte welcomed the move Tuesday by East Timor's parliament to ratify the International Unitisation Agreement and the treaty for Certain Maritime Arrangements, as they provide "legal and regulatory certainty" for the development.
"These major milestones have been encouraging for the project - we're pretty happy with it," he told a results briefing.
Woodside will begin re-staffing Sunrise and may drill one or more appraisal wells. But the company won't spend a "large amount" on the field this year, Voelte said, adding that Woodside needs to conclude fiscal arrangements with East Timor before it pushes for a development that could start production some time next decade.
The maritime treaty between East Timor and Australia is expected to come into force Friday, after the two countries exchange paperwork at a meeting in Dili, according to a spokeswoman for Australian Foreign Affairs Minister Alexander Downer.
The two neighbors plan to share the revenue from Sunrise, providing a boost to the economy of East Timor, one of the poorest countries in Asia.
Stuart Baker, an analyst at Morgan Stanley, said it is "all well and good" that Sunrise has come in from the cold.
"But it is a long way back in the development queue," he told Dow Jones Newswires, adding that Woodside still needs to secure a suitable development concept.
Woodside is operator and owns 33.4% of Sunrise. Its partners are ConocoPhillips (COP) with 30%, Royal Dutch Shell PLC (RDSB.LN) with 26.6% and Japan's Osaka Gas Co. (9532.TO) with 10%.
Market Focus on Pluto Field Off Australian Coast
Baker said that analysts are more focused on Woodside's 100%-owned Pluto gas field offshore Western Australia, where approval for a A$6 billion to A$10 billion LNG development is likely midyear.
Woodside believes "there is certainty" that the project will proceed, Voelte said, in justifying Woodside's move to lift its reserves by 27%, largely as a result of booking gas resources at Pluto.
Woodside said its annual net profit soared to A$1.43 billion from A$1.11 billion in 2005, ahead of market expectations around A$1.36 billion. Revenue climbed 39% to A$3.81 billion.
Shares in Woodside rose 1.2% to A$37.63, valuing the company at A$25 billion.
A 14% boost in production to 67.9 million barrels of oil equivalent contributed A$618 million in extra profit, Woodside said.
To shore up profits, Woodside is trying to trim expenditure and sell surplus assets, such as its share of the Legendre oil field that was disposed of effective early January. It also trimmed its forecast exploration expenditure in 2007 to A$420 million, down 16% on 2006. Woodside plans to drill around 24 exploration wells in Australia, Africa and the Gulf of Mexico.
Voelte, the former Mobil executive charged with overseeing Woodside's growth plans, believes production is now on a rising trend after several mishaps last year.
Woodside has cut its 2007 target twice in recent months. The latest revision is 72 million to 78 million barrels of oil equivalent, down from 75 million to 80 million estimated late last year.
Copyright (c) 2007 Dow Jones & Company, Inc.
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