Woodside: On It’s Own Two Feet

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 20 Nov 2017   Posted by admin

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All images: Woodside.

 

BY CAMERON DRUMMOND

 

FOR the first time in more than three decades Woodside Petroleum is again a fully independent company after the sudden, yet not unexpected, $3.5 billion exit by Royal Dutch Shell.

 

Energy producer Woodside will continue to focus on a number of major oil and gas plays on its own after Royal Dutch Shell’s
exit from the company.

These include the Greater Enfield, Greater Western Flank, Greater Sunrise and Browse developments, as well as production focus at Wheatstone, Pluto and Persephone.

 

Shell exit

In mid-November Shell completed an anticipated selloff of its remaining 13.28 per cent stake in Woodside, in a deal worth
$3.5bn.

It initially announced it had entered an agreement with two investment banks to sell 71.6 million shares on Woodside, however later that day decided to offload all 111.8 million shares following “strong demand” from institutional investors.

“This sale is another step towards the completion of our three-year, $US30 billion divestment program, which is an important part of our strategy to reshape Shell, to deliver a world-class investment case, and to strengthen our financial framework,” Shell chief financial officer Jessica Uhl said.

Woodside’s history with Shell has been a chequered one. The global oil major had a $10bn takeover bid for control of Woodside blocked by Peter Costello under the Howard Government in 2001, and had since gradually sold down its Woodside holdings.

In November 2010, Shell sold 10 per cent of the issued capital of Woodside, leaving it with a 24.27 per cent interest. This was further diluted because of Shell’s decision not to participate in Woodside’s dividend re-investment program.

Four years later Shell again sold about 78.27 million shares, representing a further 9.5 per cent divestment, leaving it with a diluted 13.28 per cent stake.
Woodside chief executive Peter Coleman said the two companies’ strong and long-standing relationship would continue into the future.

“Shell remains a key joint venture partner in the North West Shelf project and Browse,” Mr Coleman said.

 

“Woodside will maintain a close working relationship with Shell – as a joint venture partner and customer of Shell technology – and we recognise that Shell will always be part of our history,” Mr Coleman said.

 

Australia’s UniSuper and Singapore wealth fund GIC were the two investors that snapped a large chunk of Woodside shares, each promising $700m investments.

In its H1 report, Woodside said 88 per cent of its LNG production this year had been committed under short, medium and long-term contracts.

H1 sales were mainly long-term contracts (77 per cent) with 14 per cent under short and medium term deals, and the remaining 12 per cent made available for spot sales.

At the end of H1, 83 per cent of LNG production in 2018 had been committed under oil-linked contracts.

It’s 90 per cent owned Pluto project delivered 31 cargoes in H1 equating to about 2.3 million tonnes (mt) of LNG.

Over the same period, its 16.67 per cent owned North West Shelf project delivered 125 cargoes carrying about 8mt of LNG.

Phase 2 development of the North West Shelf’s Greater Western Flank project was about 62 per cent complete and progressing
on schedule.

Manufacturing of subsea equipment was underway and offshore construction activities are planned to commence in the first half of next year.

 

 

 

 

 

Massive Milestones

Mr Coleman said the post-third quarter start-up of the Wheatstone LNG project was a highlight.

“In October, Woodside realised a major component of our near-term growth strategy with the start of LNG production at Wheatstone, which will contribute more than 13MMboe of annual production once its two LNG trains and domestic gas plant are fully operational.”

Its 13 per cent owned Wheatstone is expected to produce 8.9mt a year after LNG Train 2 starts up in the next six months.

During the September quarter, its Pluto LNG project broke daily, weekly and monthly production records: July was 3 per cent higher than the previous record.

“The period marked further strong operational performance from Pluto LNG,” Mr Coleman said.

“For the second quarter in succession, Pluto achieved a number of production records, with production in July 3 per cent higher than the previous high set in the same month of last year.”

The $1.2bn Persephone project was also completed $355m under budget and six months ahead of schedule. Woodside said production flow was performing to expectation, with rates of 280 to 310 mmscf/d achieved for the two wells.

 

Developments: Gas

At Browse, 425km north of Broome, WA, Woodside is considering the development of two offshore gas FSPOs delivering between 10mtpa and 12mtpa of processed gas to existing facilities.

The company said it would continue to target development concepts and commence front-end engineering and design (FEED) in 2019.

Progression on a development decision of the Greater Sunrise gasfields remained under negotiation with the Timor-Leste government.

The fields contain 5.13 trillion cubic feet of gas, as well as 225.9 million barrels of condensate.

Mr Coleman said any willingness by Timor Leste to consider other development options for Sunrise would help improve the project’s prospects.

Woodside owns a 33.4 per cent stake, with ConocoPhillips — which operates the Darwin LNG plant — owning 30 per cent, Royal Dutch Shell 26.56 per cent and Osaka Gas 10 per cent.

Mr Coleman said that although the global LNG market was well supplied at the moment, the company expects further growth in demand from Asia.

“The long lead times on projects mean that we’ll need to get ready to meet rising demand over the next couple of years,” he said.

“That’s why we’re now working to progress the very lowest capital efficient projects that we can; low-cost developments that we expect will deliver increased production right when it’s needed.”

 

Developments: Oil

Approved for development in June last year, the $US1.9 billion Greater Enfield oil project JV off Exmouth, the project was more than 37 per cent complete and on schedule for drilling next year.

 

The project is targeting development of 2P reserves of 69MMboe (net Woodside share of 41MMboe) from the oil accumulations.

 

Woodside and JV partner Mitsui (40 per cent) are targeting first oil in mid-2019.

“Our ability to manage risk and volatility has been shored up by our low breakeven cash costs of sale at $US9.60 per barrel of oil equivalent,” Mr Coleman said.

“We’ve been saying for some time that we expect oil prices to be range bound between $US45 and $US60 per barrel.”

 

Diversifying markets

On 31 October Woodside signed a sales agreement with Germany’s RWE for the delivery of up to a dozen LNG cargoes by the end of the decade, weeks after the start-up of Train 1 at the Wheatstone LNG joint venture.

“This agreement illustrates further diversification of Woodside’s buyer relationships and the increasing interaction between Asia-Pacific and Atlantic LNG
participants,” Mr Coleman said in a statement.

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