Woodside, Santos join the petroleum profit party

As forecast the June quarter and half year revenue performances at Woodside Energy and Santos were stunning, thanks to the strength in oil and gas prices and by the completion of two company boosting takeovers.

The two oil and gas giants joined the likes of BHP, Yancoal, Whitehaven, Beach Energy and a host of smaller companies in the petroleum/gas and coal sectors to benefit from the explosion in prices in the June quarter in particular.

Woodside Energy Group reported a 60% rise in second-quarter production of oil and natural gas, thanks to the first contribution from assets acquired through its takeover of BHP Petroleum and thanks to the surge in global oil and lNG prices (which has started fading at the start of the third quarter though)

Woodside, which completed the takeover of the BHP assets at the start of June, reported production of 33.8 million barrels of oil equivalent in the three months to June 30, compared to 21.1 million BOE in the first quarter of 2022.

Total production for the six months was 54.857 million barrels of oil equivalent compared with 46.33 million. Sales for the half totalled 59.610 million BOE, up from, 53.879 million BOE.

With six months contribution from BHP Petroleum the production and sales figures this half will rise dramatically.

Woodside said its crude oil fetched an average price of US$110 a barrel in the second quarter, while the average realised price for its liquefied natural gas (LNG) output was US$13.8/mmBtu.

Combined with the increase in production (and the month’s contribution from BHP Petroleum’s local and international assets), the higher prices helped to drive Woodside’s second-quarter sales revenue to $US3.44 billion, up 44% on the March quarter and well over twice the $US1.327 billion in the June, 2021 quarter.

That saw total revenue for the six months to June 2022 jump to $US5.833 billion from $US2.493 billion from the old Woodside Petroleum assets a year earlier.

“Significant progress was made on our key projects during the quarter,” CEO Meg O’Neill commented. “All major equipment items for Scarborough have been procured and construction has begun at the Pluto Train 2 site.”

Woodside also said it has ended talks with potential buyers of part of its equity in the Sangomar oil project in Senegal.

In Thursday’s statement Ms O’Neill said

“The completion on 1 June of our merger with BHP’s petroleum business was the highlight of the period, transforming Woodside into a top 10 global independent energy producer by hydrocarbon production, and making us the largest energy company listed on the Australian Securities Exchange.

“Woodside received a net cash payment from BHP Group of approximately $1.1 billion, which included the cash remaining in the bank accounts of BHP Petroleum immediately prior to completion.

“The merger was overwhelmingly endorsed by Woodside’s shareholders at our Annual General Meeting in May, and they are now seeing first evidence of the increased financial and operational strength the transaction will deliver.

“The subsequent listings of Woodside shares on the New York and London stock exchanges were historic moments for the company, reflecting our more diverse shareholder base.”

“Woodside’s net profit after tax for the first half of 2022, including sales revenue and the associated production and sales volumes, will incorporate the contribution of the BHPP portfolio from completion of the merger on 1 June 2022. “

Woodside shares fell 4.4% to $31.14. Some analysts reckoned the production and revenue performance was a bit light on. Global oil prices were again weaker yesterday as well.

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A similar story to Woodside for Santos, except it had a full half’s contribution from its big takeover of 2021 – Oil Search – to boost production, sales and revenues, on top of the higher world prices in the wake of the Russian assault on Ukraine.

As a result, Santos said its first-half sales revenue jumped 85% to $US3.8 billion compared with $US2.04 billion (which was before the Oil Search takeover).

Santos saw a 9% rise in oil and natural gas production to 51.5 million barrels of oil equivalent in the first half, with second-quarter output totalling 25.5 million barrels.

Santos said its crude oil fetched an average price of $US119.55 a barrel between April and June, up from $US$113.09 a barrel in the March quarter.

The average realised price for its liquefied natural gas lifted to $US14.66/mmBtu in the second quarter, nearly double levels of the same period a year ago.

CEO Kevin Gallagher said record sales revenue, production and free cash flow in its fiscal first half were achieved despite several planned shutdowns of assets, including at PNG LNG in Papua New Guinea and Darwin LNG and the Cooper Basin in Australia.

The company said it generated $US843 million in free cash flow in the second quarter, bringing first half free cash flow to $US1.7 billion

Santos said in Thursday’s report that it has already exceeded the lower end of planned savings from the Oil Search deal of US$90 million-US$115 million.

The company has spent $US174 million of the initial $US250 million on-market share buyback completed by the end of the quarter, the Barossa LNG project (north of Darwin) is 40% complete and progressing on schedule and budget and the Pikka Phase 1 project in Alaska has received all major environmental and regulatory approvals and has sufficiently advanced preparatory work to achieve a final investment decision (FID) – ready status, as planned.

“Despite the period of price and demand volatility, Santos domestic gas customers paid significantly less than that paid by international customers,” Mr Gallagher said in Thursday’s statement,

“These domestic prices are reflective of the long-term contracts that almost all of our Australian customers are on, rather than much publicised spot domestic market prices, which make up approximately only 10 per cent of the east coast gas market.

“Our new capital management framework announced in April combined with strong free cash flows position us well to provide returns to shareholders at the half-year results in August,” he added.

Santos shares eased 1.9% to $7.25.