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Woodside Petroleum Ltd Quarterly Activities Report

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Woodside Petroleum Ltd (ASX: WPL) is a global energy supplier that is specialised in the upstream petroleum sector. Woodside supplies oil and gas and is the largest LNG producer in Australia. Woodside’s market capitalisation is A$21 billion.

 

WPL


What has been Woodside Petroleum operating environment in Q3FY2020?

The recent drop in oil prices is caused by supply and demand issues. On 5-6 March 2020, OPEC and non-OPEC oil producers met in Vienna to discuss oil production and prices in the wake of weakening global demand due to lower global economic activity in part due to the impact of the coronavirus (COVID-19). The meeting concluded with Saudi Arabia and Russia not agreeing to cut production to increase the price of oil. This has resulted in Saudi Arabia and Russia embarking on a production war to capture increased share of the global oil market regardless of the implications for the price of oil. This is a supply issue for the global oil market, with production significantly exceeding demand, causing global oil prices to fall to around US$25 per barrel from US$55 – US$60 per barrel.

On the demand side, COVID-19 is causing a fall in global oil demand, putting further downward pressure on global oil prices.


What are the key points of Woodside Petroleum quarterly report?

Woodside Petroleum production for the third quarter is 24.4 MMboe, up 12% from Q1 2019, while total revenue was $1,1 billion for the quarter, down 23% compared with the previous quarter (Q2FY2020). This downward movement in revenue will continue in the June quarter as the full impact of the fall in oil prices flows through.

In the March quarter 2020, Woodside Petroleum has been focusing on implementing the company’s response to COVID-19 and lower oil prices. This includes reducing targeted 2020 total expenditure by around 50%, hedging 13.35 million barrels of oil for the period April to December 2020, achieving FID on Sangomar Field Development Phase 1, achieving FID on Greater Western Flank Phase 3, and subsequent to the period, receiving Commonwealth regulatory approval for the Scarborough Offshore Project Proposal.


What is the outlook for Woodside Petroleum?

The short-term outlook for Woodside Petroleum is negative. This short-term outlook is based on the challenging operating environment Woodside Petroleum is facing due to COVID-19 and a weakening oil price.

However, one positive is that Woodside Petroleum management has hedged 13.35 million barrels of oil, pricing between July and December 2020 at an average price of $33.03 per barrel, which is currently higher than the spot price for oil. Woodside Petroleum FY20 production guidance remains unchanged at 97-103 MMboe.

However, the long-term outlook for Woodside Petroleum is positive. This outlook is based on several long-term projects that should underpin future growth of the company. Firstly, the developments of the SNE field located on the west coast of Senegal, Africa. Secondly, development of the Scarborough gas field located offshore Western Australia. Finally, the Browse Basin gas field located offshore Western Australia. In addition to these long-term projects, the oil price should strengthen particularly if global economic growth returns in 2021.


What is the market reaction?

The market reaction to Woodside Petroleum is broadly neutral, Woodside Petroleum share price is down around 1.5%. However, this may not be attributed to Woodside Petroleum announcement, but more to the ASX/200 being down around 1.9%.

 


Disclaimer:


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.


 

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