Oil & Gas

16 Aug 2023

Woodside Energy Set to Log Strong First-Half Profit on Resilient LNG Prices

16 Aug 2023  by reuters   

Australia's Woodside Energy Group's exhibition booth is seen at the World Gas Conference 2022 in Daegu, South Korea May 23, 2022. REUTERS/Florence Tan/File Photo Acquire Licensing Rights
Woodside Energy (WDS.AX), Australia's no.1 independent oil and gas producer, is likely to post a strong first-half profit growth, underpinned by resilient liquefied natural gas (LNG) spot market prices and upbeat production levels.

Oil and natural gas prices, which rose to record highs last year in the wake of the Russia-Ukraine war, slipped in the first half but stayed above long-term average levels despite a slower-than-expected recovery in key consumer China weighing on demand.

A Visible Alpha consensus anticipates Woodside's first-half core net profit after tax (NPAT) at $2.02 billion, above last year's $1.82 billion, with strong output providing a boost.

However, smaller peer Santos' (STO.AX) first-half core net profit is expected at $804 million, according to Visible Alpha, taking a hit from weaker realised prices and a drop in output.

The two oil and gas giants are expected to report their results early next week.

Uncertainties from threatened worker strikes over pay and conditions at Woodside's North West Shelf LNG plant and Chevron's (CVX.N) Wheatstone and Gorgon LNG facilities also threaten around 11% of global supply, resulting in prices soaring.

"For investors, the bottom-line is that in a downside outcome of 90 days of outages at both plants, the earnings impact from foregone production is partially offset by tightening spot LNG markets," Citi said in a note.

To add to the sombre mood, a slower-than-expected economic growth in China and concerns about global economic prospects could dampen outlook for fuel demand.

"There is a struggling Chinese economy and that's impacting demand (where) other places such as India might be able to fill the void to large extent and that's going to shore up energy demand in the second half of this year and also in 2024," said Tim Waterer, chief market analyst at KCM trade.

Shares of Woodside have gained 9% so far this year, while those of Santos are up 10.8%. The energy sub-index (.AXEJ) has climbed 8.2% during the same period.


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