Monday, January 30, 2023
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Operational snags drag on Woodside

Woodside Energy (ASX:WPL) shares were weaker on Tuesday after the company released lower-than-expected production guidance for 2023, thanks to delays at large new oil projects in West Africa and the US, along with a lengthy maintenance shutdown at its Pluto LNG operation offshore north-western WA.

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Woodside said it expects production of 180 – 190 million barrels of oil equivalent (MMboe) in 2023 (it has a December 31 year).

This will be the first full year of production since the company picked up BHP’s oil and gas business midyear.

That compares to its 2022 production guidance of 153 – 157 MMboe which has a part contribution from the BHP assets here and offshore.

Analysts wonder if the 2023 guidance is a few million barrels short from where it should be.

But the company pointed to a change in the way it calculates its production.

The production guidance using the previous conversion factors would have been approximately 6 MMboe higher which may have assuaged investor concerns on Tuesday.

They point out that Woodside recently delivered third quarter production of 51.2 MMboe, which is around 205 MMboe on 12 months basis.

This guidance comprises LNG production of 83-85MMboe, pipeline gas production of 40-42MMboe, crude and condensate production of 50-55MMboe, and natural gas liquids production of 7-8MMboe.

Woodside shares fell more than 5% in early trading but the loss was trimmed over the rest of the session and the shares closed down just 0.3% at $36.83.

The rise in oil prices during the day as Chinese security ended widespread Covid lockdown protests also would have helped the Woodside share price.

Those figures do not include any production from the Sangomar Field Development Phase 1 project in West Africa, which was targeting first oil in late 2023

Woodside also pointed out that the Mad Dog Phase 2 project in the Gulf of Mexico is undergoing commissioning and Woodside assumes for production guidance purposes a start-up in mid-2023.

Woodside’s capex next year was projected to be in the range of $US6 billion to $US6.5 billion (from $US4 to $US4.3 billion in 2022) which assumes no change to current participating interests. Approximately half of this will be put towards the Scarborough operation LNG project offshore northwest WA.

The investment split is as follows: 50% to Scarborough, 20% to Sangomar, 15% to the Gulf of Mexico and Caribbean and 15% to Australia, corporate and other.

Woodside also failed to provide production costs guidance for 2023.

Woodside said it expects approximately 20-25% of its 2023 LNG output to be sold at prices linked to gas hub indices. This percentage is unchanged compared to 2022 expectations.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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