Australia Prepares for Growing Challenges as Market Environment Evolves
“The big LNG projects around Australia are being built despite some delays and cost blowouts. There have also been a few conventional oil and gas discoveries which haven’t happened for a few years - that’s good for the industry,” Hedstrom said.
Australia’s major companies have indicated they are on the lookout for expansion, with Woodside Petroleum Ltd., in particular, showing this intent by recently agreeing to buy Apache Corp.’s interests in the Wheatstone and Canada’s Kitimat LNG projects for $2.75 billion.
Hedstrom said Woodside was well placed to stay on the acquisition hunt. “They have strong cash flow and a good balance sheet, even after buying some assets,” he noted.
Dartnell considered most of Australia’s largest oil and gas companies to be “in a fairly good position”.
“There are not a lot of highly leveraged players out there, most of them have fairly modest debt positions. Most, somewhat fortuitously in some cases, have been able to do deals in the past two or three years that have given them strong balance sheet positions,” he said.
Change in Focus
Australia’s majors, along with their smaller counterparts, are being urged to increase focus on operational improvements around cost control and productivity, according to Cann.
“It needs to very much become the mantra,” Cann said. “We think of LNG in Australia as a factory model and any company working in the industry not as a traditional gas service provider but as an intricate part of a manufacturing system that needs to design the business that way - that’s going to drive our focus.”
Dartnell’s advice was even more straightforward: “This is a time to be prepared to buy, refinance or defend.”
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