Woodside faces production issues, ‘volatility’ as oil and gas prices rise

The management of Woodside Petroleum Ltd. said a combination of maintenance, weather and geopolitical tensions impacted its oil and gas production and sales in the first quarter. However, rising prices – especially for liquefied natural gas (LNG) – have kept revenues high.

The Australian producer experienced a mix of ups and downs with its gas business during the quarter. Its onshore Karratha gas plant near the offshore North West Shelf Venture and its Wheatstone LNG project in Western Australia saw higher liquefaction volumes during the period, but their adjacent fields saw reduced production. The Pluto LNG facility, also in Western Australia, suffered the effects of “reliability events” and weather issues, according to the company.

In addition to production issues, Woodside CEO Meg O’Neill said the company had experienced a drop in sales volumes as a result of the war in Ukraine and “reduced business activity in the market currently volatile global energy market”. But, with the heightened volatility, O’Neill said “revenues were supported by a strong average realized portfolio” as oil and gas prices soared over the period.

[Want to know how global LNG demand impacts North American fundamentals? To find out, subscribe to LNG Insight.]

Woodside’s LNG sales volumes increased compared to the same period last year, reaching 22.0 million boe in 1Q2022 compared to 21.0 million boe in 1Q2021. LNG sales revenue also topped the prior year, growing to $2.04 billion in 1Q2022 from $838 million in 1Q2021.

Woodside reached an average realized LNG price of $16.00/MMBtu in 1Q2022, compared to $6.90/MMBtu in 1Q2021. Its average realized price for LNG remained unchanged compared to 4Q2021.
Combined production volumes for all products fell to 22.3 million boe in 1Q2022 from 23.7 million boe in 1Q2021.

As volatility and production issues kept Woodside’s results below those of the previous quarter – a record quarter in terms of revenue for the company – O’Neill said the producer could be able to continue to meet its challenges and pursue healthy returns in the next quarter.

“We expect in the second quarter to see continued benefits from stronger pricing, reflecting the oil price mismatch in many of our LNG contracts,” O’Neill said.

The company is also anticipating the results of what it called a “significant transition point” for its assets in the North West Shelf Venture after reaching start-up of its Pluto-Karratha Gas Plant Interconnector pipeline in March. With the pipeline in place, Woodside will be able to process third-party gas at its Pluto LNG facility for the first time.

Woodside said the pipeline also supports accelerated production from its Pyxis Hub subsea gas tie-in project in the North Carnarvon Basin. The first phase of the project is now operational and has supplied gas for an LNG shipment. The overall Pyxis Hub project is expected to include the subsea connection of the Pyxis, Pluto North and Xena offshore fields to Woodside’s Pluto platform. The company said the project is 83% complete and on track for work on the second phase to begin later this year.

Also on the company’s horizon is its potential merger with BHP Group announced last year. The deal would merge their natural gas and oil portfolios in an all-stock transaction estimated at $28 billion.

Shareholders are expected to vote at the annual general meeting on May 19. If approved, the resulting company could be one of the largest producers in the world and the largest energy company on the Australian Stock Exchange.

Woodside posted revenue of $2.35 billion for 1Q2022, compared to $1.12 billion in 1Q2021.