Solid results for Woodside and Santos
Two of Australia’s biggest oil and gas companies, Woodside Petroleum and Santos, rose in early trade after reporting record December quarter production and sales figures, albeit in line with forecasts.
Shares in both companies have rallied strongly in recent months as oil prices have recovered and in the wake of upbeat announcements by Woodside, flush with cash from its Pluto LNG project and entering into a joint venture at Israel’s Leviathan field with Noble Energy, and Santos which has reported its first shale gas production from the Cooper Basin and a significant discovery at its Crown field in the Browse basin off WA.
In early trade, Santos shares had risen 1.6 per cent, or 19 cents, to $11.83, outperforming the ASX200 Energy Index return of 0.6 per cent and the broader sharemarket return of 0.2 per cent. Woodside was in line with the sector rising 0.6 per cent, or 22 cents, to $35.42.
Santos has risen 10 per cent since just before Christmas, while Woodside has jumped 6 per cent. West Texas Intermediate Crude oil has jumped 10 per cent since mid-December, from $US86 a barrel to $US94 a barrel today.
Santos reported a 10 per cent rise in calendar 2012 production to 52.1 million barrels of oil equivalent (mmboe) from 47.2 mmboe in 2011. Its annual sales revenues also hit a record $3.2 billion, up 18 per cent on 2011.
Santos said it expected 2013 production to be in the range of 53 to 57 mmboe and capital expenditure (excluding capitalised interest) to be approximately $4 billion, both unchanged from guidance issued in November 2012.
Santos said its full-year sales revenue result was driven by a 33 per cent rise in crude oil production. Natural gas, ethane and LNG production also rose, by 18 per cent, in the December quarter, thanks to stronger performances from the Carnarvon, Cooper and Otway basins.
Woodside lifted production and revenue by about 30 per cent in 2012 to new records. Woodside’s revenue in the 12 months to December 31 was $6.2 billion, up 30 per cent from $4.8 billion in 2011.
Production in 2012 was 84.9 million barrels of oil equivalent (mmboe), up 31 per cent from 64.6 mmboe in 2011 and within its previously-issued guidance.
One oil and gas analyst, speaking off the record, said both production reports were in line with market expectations.
‘‘There was nothing too new in either of them. There is the potential Santos is towards the bottom end (of consensus forecasts) so that might surprise some of the other guys out there.
‘‘Some analysts may be over-estimating what some of (Santos’) fields can do.’’
The analyst described Woodside’s report as ‘‘non-event’’ given recent announcements.
On Monday the CBA’s energy analysts released 13 key predictions for this year, including:
- Australian shale gas resources grow to over 10 trillion cubic feet, with reserves likely to be booked by Beach Petroleum and Santos in the Cooper Basin, leading to consolidation among the smaller shale players there;
- Woodside to defer a final investment decision on its contentious Browse project for at least 18 months, and announce a share buyback of $1-2 billion in the second half of this year;
- North American LNG export forecasts would be upgraded well beyond 40-50 million tonnes per annum, confirming no further greenfield Australian LNG developments near term;
- Santos’ Gladstone LNG coal seam gas-fuelled project would experience further cost blowouts and consolidate with the Shell/Petrochina Arrow LNG project.
The analysts tipped Oil Search, which is about to be transformed by the Exxon-led PNG LNG project, worth an estimated $10 per shaare, as the standout pick among the large oil and gas companies, followed by Santos and Woodside. Aurora was the ‘‘standout’’ amongst the smaller oils.