By David Winning
SYDNEY--Woodside Petroleum Ltd. reported a half-year net profit of US$317 million, as it pushes the merits of a merger with BHP Group Ltd.'s oil-and-gas unit.
The result for the six months through June marks a return to profit for Woodside, which reported a net loss of US$4.07 billion a year ago as it absorbed a hefty impairment of oil and gas assets from Australia to Senegal.
Directors of the Perth-based company declared an interim dividend of US$0.30 a share, up from a payout of US$0.26 at the same stage a year earlier. That represents a payout ratio of around 80% of underlying net profit of US$354 million.
Like other energy companies, Woodside is benefiting from crude oil and natural gas prices sharply rebounding from lows reached early in the pandemic last year. Brent crude--the global oil-price benchmark--is up 33% year-to-date and settled Tuesday at US$69.03 a barrel.
In the second quarter of the year, Woodside's oil-and-gas output fetched an average price of US$46 a barrel of oil equivalent. That was up 4.5% on prices in the first quarter and 64% higher than the same quarter of 2020.
Higher realized prices drove a 31% increase in sales revenue during the first half of the year, offsetting a 7.6% decline in production. Woodside is targeting output of 90 million-95 million barrels of oil equivalent in 2021, compared to record production of 100.3 million barrels in 2020.
Woodside's outlook depends largely on completing the deal with BHP, and advancing key growth projects in Africa and Australia. Woodside's shareholders are forecast to own 52% of the expanded company, which will become one of the world's ten-largest producers of liquefied natural gas. Combining the businesses would generate more than US$400 million in annual savings, BHP and Woodside said in a joint statement on Tuesday.
Analysts valued BHP's oil-and-gas unit at $15 billion, just smaller than Woodside's $15.5 billion market value at the time the discussions were made public.
RBC Capital Markets estimate the expanded company would produce 200 million barrels of oil equivalent annually, including 10 million metric tons of liquefied natural gas. Merits of the deal include a more diversified earnings base with fiscal 2021 proforma revenue of more than US$8 billion and gearing below 12%, it said.
Woodside aims to produce oil from the Sangomar project in Senegal for the first time in 2023, and is seeking to bring in a new investor that would help to fund a development and reduce its equity interest to 40-50%.
The company is also targeting a final investment decision on developing the Scarborough natural gas project and adding a second processing unit to its Pluto liquefied natural gas facility by the end of this year. The deal with BHP includes an option for the miner to sell a 26.5% stake in the Scarborough joint venture to Woodside for US$1 billion if a final investment decision happens before Dec. 15.
RBC thinks it is highly likely that BHP will exercise the option. "In our view, Woodside has to deliver Scarborough, because it is gas supply that is required to backfill both the North West Shelf LNG and Pluto LNG plants, as well as support Pluto LNG T-2 expansion," the bank said late Tuesday.
Last month, Woodside said it wants to sell up to 49% of Pluto Train 2 while testing the interest of investors in a stake in the Scarborough development as well.
Write to David Winning at [email protected]
