Slump in oil output to slice Woodside profit

Woodside's production report yesterday for the September quarter revealed that oil production from the field at the end of the period had slumped to 88,970 barrels a day (on a 100 per cent basis).

That was down sharply on the 105,605 barrels-a-day average for the entire quarter which, in turn, is down from the 170,000 barrels-a-day peak of November 1999.

While it has always been known that Laminaria would fall away steeply from its peak production rates, there were hopes that output could hold at higher levels following the drilling of two new production wells at a cost of $127.5 million.

The two wells were completed in June and, temporarily at least, pushed the highly profitable project to a daily production rate of 140,000 barrels.

The Laminaria field is about 550km north-west of Darwin, and was developed at an initial cost of $1.37 billion.

Equity interests in the oil field are Woodside 44.925 per cent, BHP Billiton 32.61 per cent and Shell 22.46 per cent.

The decline in Laminaria output is one of the key factors in market consensus for Woodside's net profit to fall from $910 million to $720 million this [calendar] year despite strong oil prices.

It also highlights the need for Woodside to fill the production/profit gap. To that end, there was speculation the group is close to spending $1.6 billion on a US acquisition, part-financed by a $1 billion rights issue.

Woodside's share of Laminaria oil production for the nine months to the end of September was 12.12 million barrels, down from 16.13 million barrels in the previous corresponding period.

That slump contributed to a fall in Woodside's total production for nine months to 48.48 million barrels of oil equivalent (BOE), down from 50.83 million BOE.

The sharemarket indicated it was not concerned with the disclosure of lower output, as Woodside's share price closed the day 14c higher at $12.18.

Apart from Laminaria, the group's production effort was generally above expectations.

Two additional cargoes in the quarter meant that sales tonnages of liquefied natural gas were up from 342,945 tonnes to 352,222 tonnes (Woodside's equity share).

Along with stronger oil prices, the record operating performance of the North-West Shelf project saw Woodside's revenues rise from $621 million to $708 million for the quarter.

Exploration in the quarter at $7.2 million was up from $4.3 million in the previous corresponding period. Capitalised exploration expenditure rose from $59.4 million to $65 million.