Sunday, April 18, 2021

Energy giant Woodside takes $6.3bn hit as COVID-19 reshapes oil market

Energy giant Woodside takes $6.3bn hit as COVID-19 reshapes oil market

He added that the company was in a strong position to take advantage of opportunities “which will inevitably arise” during and following the unprecedented energy market uncertainty.


“We’ve taken some tough decisions over recent months in response to the COVID-19 pandemic and
oversupply in our key markets, but Woodside’s focus remains on cash preservation, capital discipline and maintaining the strength of our balance sheet,” he said.

“This will ensure we can deliver appropriate returns to shareholders and maintain our investment grade credit rating over the long term.”

Woodside’s move comes after BP wrote off more than $25 billion last month and slashed its future oil price assumptions from $US70 a barrel to $US55 a barrel, warning investors it believed the coronavirus crisis would accelerate the shift away from fossil fuels in favour of cleaner energy.

In its new price assumptions released on Tuesday, Woodside said it expected the benchmark Brent oil prices would be as low as $US35 a barrel this year, $US44 in 2021 and increasing to $US65 by 2025. For LNG, Woodside said it forecast LNG prices of $US3 per million British thermal units this year, $US4.4 in 2021 and $US8 in 2025.

Long-term price changes could have serious implications for the nation’s $50 billion-a-year LNG export sector and imperil the viability of billions of dollars of projects awaiting final decisions off the coast of Australia due to lower-than-expected rates of return.

Since BP’s move last month, analysts have warned that market players in Australia were likely to revisit their price assumptions.

“It comes as little surprise,” Morgans analyst Adrian Prendergast said on Tuesday.

“We’ve been flagging the prospect that Woodside might write-down the carrying value of a range of its assets for some time given the large trend we are seeing across the global industry of revising back price assumptions.”

After Woodside made clear it was interested in acquiring Chevron’s stake in the North West Shelf LNG joint venture off WA, Mr Prendergast said the revisions raised questions about the potential need for external funding if it still intended to progress with plans to develop its $30 billion Browse project.

“In our view it is the only obvious bidder for Chevron’s stake in the North West Shelf that’s been put up for sale, and they have ample liquidity in the short-term,” he said.

“If they are interested in going for that and still progressing projects for Browse, does this start to place a greater need on external funding? The answer is potentially yes.”

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