Woodside Petroleum Reports 40% Increase in Profit

August 19, 2010

Woodside Petroleum Ltd. of Sydney, Australia surpassed their estimates to achieve a 40% rise in profit for the first half of 2010.  However, Woodside also announced a delay in their investment in a planned LNG project expansion, hinging upon the discovery of more gas reserves.

Increased sales of liquefied natural gas (LNG) to Asia from Australia’s North West Shelf project were a determining factor in Woodside’s net profit increase to US$901 million, from a restated US$646 million a year ago. Their total revenue increased 45% over the same year period to US$2.1 billion.

Despite this good news, Woodside has decided to delay the expansion of its Pluto liquefied natural gas terminal in Western Australia until 2011. The increased investment hinges upon the availability of more reserves of gas, either through further exploration or from third-party suppliers.

Woodside Petroleum has plans for expanding Pluto, as well as the construction of two additional LNG terminals named Browse and Sunrise, in order to meet heightened demand, predominantly from Asia, for cleaner alternatives to coal.

Many industry analysts were already expecting a delay in the Pluto expansion, noting that the lack of results by competing company, Gorgon LNG, could be helpful in giving Woodside more time to evaluate their potential investment.

Many investors, after Woodside’s recent report of two additional discoveries of material gas, were hopefully expecting an announcement that the Pluto investment would definitely occur.

Although these two recent discoveries could financially provide confidence in expanding the Pluto site, Woodside probably needs more discoveries, closer to the coast, in order to justify their future investment of billions of dollars.  The recent news of favorable terms in a tentative agreement with potential third-party natural gas suppliers could also assist in the decision to move forward with the Pluto expansion.

BHP Billiton has reportedly been in discussions with Woodside about supplying the Pluto site with gas from their Scarborough field, which is owned jointly with Exxon Mobil Corporation.

Woodside is competing for gas with Chevron Corporation.  Chevron, in order to fuel its Wheatstone LNG development, recently entered into an agreement to buy gas from Apache Corporation and Kuwait Foreign Petroleum Exploration Corporation.

Chevron also recently announced a large gas discovery which could support the expansion of Wheatstone.  This last discovery brings Chevron’s total to nine discoveries made offshore in Western Australia since August of last year.

Woodside has drilled 10 wells as part of its current exploration campaign, with a planned total of 20.  Although six of the 10 have been positive, the campaign has been delayed due to technical difficulties as well as the late delivery of a drilling rig.

Woodside’s drilling plans include an additional six wells before 2010, as well as six drilled wells in 2011.

Woodside’s second quarter production report, released in July, did not specify a total production goal for the end of 2010.