Woodside Cuts Production Forecast
MELBOURNE, Nov 16, 2006 (Dow Jones Newsires)
Australian oil and gas producer Woodside Petroleum Ltd. (WPL.AU) has again been forced to downgrade its full year production forecasts in the wake of complications at its Enfield oil operation.
Woodside began 2006 forecasting full year production of 76 million barrels of oil equivalent but cut this to 72 million barrels in June.
In September the Perth-based company said the revised target would be hard to achieve and Thursday it gave a new forecast of between 67 million and 68 million barrels.
"I am not going to mask my disappointment - we should have done better this year," Woodside chief executive Don Voelte told investors at a briefing in Sydney.
Voelte said most of the shortfall is due to lower than expected production from the A$1.4 billion Enfield oil project off the north west coast of Western Australia.
Enfield began production in July and Woodside expected it to produce 85,000 barrels a day for about 14 months.
Instead a key production well encountered water and the field is currently producing 43,000 barrels a day with Woodside forecasting average production through 2007 between 45,000 and 55,000 barrels a day.
Clint Eastwood fan Voelte said 2006 has been a story of "the good the bad and the ugly."
He nominated headaches at the Chinguetti oil joint venture in Mauritania as the ugliest.
That reservoir has proven more complicated than expected and Woodside now estimates proven and probable reserves are about 53 million barrels of oil, 57% below the original estimate of 123 million barrels.
Voelte said the bad was Enfield and the nine month delay at the A$1 billion Otway gas joint venture off the coast of Victoria.
But Woodside still sees plenty of good and, with progress being made on major LNG projects off the northwest coast of Western Australia, analysts agree.
Woodside is operator of Australia's biggest resources project, the A$14 billion North West Shelf joint venture in Western Australia where a fifth LNG train is on schedule to take capacity to 15.9 million metric tons a year from late 2008.
At its nearby Pluto LNG development Woodside is targeting an ambitious 2010 startup with production of up to six million tons a year.
And appraisal work is underway at the company's giant Browse field further north off the Western Australian coast, where it is firming up plans for an LNG processing plant with capacity of up to 15 million tons a year to develop the huge 20 trillion cubic feet gas resource.
"There is no company in the world you can invest in that is as highly leveraged in LNG as this company," Voelte said.
Voelte said despite its difficulties, Woodside will still post record production, earnings and cashflow in 2006.
The 2006 production downgrade was slightly more than most analysts had expected and Woodside's forecast of 2007 production between 75 million and 80 million barrels of oil equivalent is also at the lower end of expectations.
CommSec's Martin Petch said Woodside's production headaches are short-term issues involving some bad luck and that its growth profile and position in the LNG market remains intact.
"For the long term it's still a positive story but Woodside would want to avoid this type of short-term disappointment and people getting the impression they on occasion over-promise," he said.
Analysts at the briefing were told Woodside was perfectly placed to take advantage of a shortage of LNG in the Asia Pacific which is forecast to deepen around 2012.
Woodside has been working on a plan to export Australian LNG to the west coast of the U.S. via its OceanWest terminal and Voelte said Thursday the company also has ambitions to establish an Atlantic Basin LNG supply to sell to Europe and the east coast of the U.S.
The company plans to spend about A$419 million on exploration in 2007 and drill 24 exploration wells at tenements in Australia, the Gulf of Mexico and Africa.
Woodside said it will continue chasing acquisitions in the Gulf of Mexico, even though its takeover bid for Gulf producer Energy Partners Ltd. (EPL) now looks unlikely to succeed.
EPL continues to trade above Woodside's offer price of US$23 a share ahead of the offer's close Friday.
Shares in Woodside closed down 3.1% at A$32.68.
Copyright (c) 2006 Dow Jones & Company, Inc.
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