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Woodside and Santos post record Q3 revenue on gas output

BY DAVID WINNING

SYDNEY -- Woodside and Santos each reported record quarterly revenue as the companies sold more natural gas at higher prices, reassuring investors that Australia' s resources boom may have further to run.

Woodside said revenue in the third quarter jumped 28% to $1.83 billion from the previous quarter, driving shares in Australia' s largest oil company after BHP Billiton up as much as 4%. Santos shares also climbed after higher natural gas output in Australia' s Carnarvon Basin where international oil companies have made several major discoveries helped lift revenue in the quarter through September to $882 million.

The companies have been plowing billions of dollars into gas export projects targeting Asian customers, as they seek to transform themselves from oil producers into ones that generate the bulk of their revenue from natural gas. They' ve placed bold bets on developments in Australia and Papua New Guinea that are capable of supplying fast growing Asian demand for cleaner burning fuels.

Woodside said that its flagship $14.9 billion Pluto LNG, project in Western Australia state had performed so well since starting in March that oil and natural gas output this year across its business may be as much as 8% above earlier guidance.

Pluto is the first of about 12 new LNG projects that international energy companies such as Chevron and ExxonMobil hope to bring online in the region in a narrow window from this year through 2017. The investment boom has added pressure on an already stretched resources services sector, driving up labor and equipment costs sharply.

LNG projects account for around two thirds of the roughly $260 billion in new investments committed by Australia' s resources industry, and have been largely shielded from the wave of project cancellations and delays in mineral projects in recent months.

Whereas prices of iron ore Australia' s largest export revenue generator slumped 22% in the July September period compared with the previous quarter and forced mining companies to scale back investments, Santos said natural gas prices were up 13% over the same timeframe.

Still, the sudden downturn in the market for iron ore and coal prompted Australia' s Resources Minister Martin Ferguson among others to call the end of the boom in high commodity prices.

In its statement, Woodside predicted oil and natural gas production this calendar year would be in a range of 83 and 86 mboepd, comfortably above its earlier guidance of between 77 and 83 mboepd.

"The increase in the range is due to better than expected performance from Pluto LNG and the number of contingent shutdown days being reduced from 20 to three days for the remainder of 2012," Woodside said.

Management had thought Pluto would operate at only 83% of its capacity in the July-September quarter, but it outperformed expectations by running at a rate of 95% and producing 1.1 million metric tons of LNG and 851,102 barrels of condensate, a type of light oil.

Pluto' s importance to Woodside is underscored by management expectations that it will account for 41% of total oil and natural gas production of between 88 and 94 mboe next year.

Santos is poised for sharp production and revenue growth from 2014 when the Exxon led $15.7 billion PNG LNG project in Papua New Guinea ships its first LNG cargo to Asia, while the company' s $18.5 billion GLNG project in Australia' s Queensland state is due to follow it into production a year later.

In its statement, Santos said changes to the timing of spending on the GLNG project and development of assets in the Gunnedah Basin of New South Wales state has prompted a cut to its guidance for capital expenditure in the current calendar year to $3.5 billion from a previous forecast of $3.75 billion.

On a quarterly basis, Woodside said its oil and natural gas production rose 65% on year to a record 26.5 mboepd, while Santos said its output rose 6% on-year to 13.5 mboepd.

Dow Jones Newswires

10/18/2012

 

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