Oil and Gas News

Woodside reduces production costs, balances debt profile

Woodside is taking key steps to protect the financial health of the company, including halving its forecast expenditures for 2020 and deferring final investment decisions on its major Western Australian projects.

Chief executive officer and managing director Peter Coleman said the company’s highest priority is the health and safety of its people, staff and contractors, their families, and its communities amid the COVID-19 pandemic.

“We’ve had teams working since January to prepare our business for COVID-19 and have taken steps to comply with expert health and government guidance,” Coleman said.

“For instance, we needed to reduce the number of people on our offshore platforms, given the close work and living arrangements. We also put in place new arrangements to minimise infection risks to those who are critical to our operations.”

Woodside, in the past two years, has built its financial resilience in preparation for a growth period involving higher capital expenditure.

At the end of February, Woodside recorded $US4.9 billion($7.9 billion) on hand, total liquidity of $US7.9 billion, and low gearing of 13.8 percent.

“Our debt profile is well balanced and low cost. Our debt covenants are not at risk under current conditions,” Coleman said.

“Woodside’s unit production costs in 2020 across the portfolio is expected to remain very competitive at only $4.50 per barrel of oil equivalent.”

Woodside advised that to help manage commodity volatility and improve revenue certainty, it has taken steps to reduce exposure to further downside, hedging 11.85 million barrels of oil between April and December at an average price of $33.47 per barrel.

The company also agreed to fix the price of 2.4 million barrels of LNG production over the same period.

“Now, as I’ve already mentioned, we’re cutting spending, non-essential activities this year have been cancelled or deferred,” Coleman said.

“This delivers an approximately 50 percent reduction in our forecast total expenditure to $2.4 billion, including a reduction of around $100 million in operating expenditure and a 60 per cent reduction in investment expenditure.

“We’ve acted quickly and decisively to cut costs. We’re deferring some non-essential maintenance activity and most of our exploration program.

“We’re hitting the pause on some of our proposed growth projects, delaying Woodside’s final investment decision for Scarborough and Pluto Train 2 to 2021. We’re also delaying Woodside’s FID target for Browse.”