Woodside Petroleum Profit Rises 67%, Beats Estimates

By Angela Macdonald-Smith

Aug. 27 (Bloomberg) -- Woodside Petroleum Ltd., Australia's second-biggest oil and gas producer, beat analysts' estimates to post a 67 percent increase in profit as prices rose to records and output started at an oil project off the northwest coast.

Net income climbed to A$1.02 billion ($874 million) in the first half ended June 30, from A$608 million a year earlier, the Perth-based company said today in a statement. That's higher than the median forecast of A$939.3 million in a Bloomberg News survey. Woodside rose to the highest in five weeks in Sydney.

Chief Executive Officer Don Voelte, 55, has started new fields, gaining from the 62 percent advance in oil prices in the past year. Production began at the 50 percent-owned Stybarrow field in November and at the delayed Neptune project in the U.S. last month, while the Vincent field in Australia is due to pump its first oil this week.

``It's a strong result; everything seems to be in line,'' said Brendan Warn, an oil and gas analyst at Macquarie Group Ltd. in Sydney. ``They are saying there will be stronger production in the second half of 2008 and they will reach their full-year output target.''

Woodside, 34 percent-owned by Royal Dutch Shell Plc, gained A$1.92, or 3.4 percent, to A$58.42.

The result was boosted by gains on foreign exchange and derivative contracts, said Mark Greenwood, an oil and gas analyst at JPMorgan Chase & Co. ``These are non-operational items that are not going to be sustainable,'' he said.

`Imminent' Production

A A$2.6 billion expansion of liquefied natural gas production capacity at the Woodside-operated North West Shelf venture will contribute to an increase in output in the second half, Woodside said. Production from the new unit is ``imminent'' and the first shipments are due in October, Voelte said on a conference call.

The company said it is ``on track'' to achieve its 2008 output forecast of 80 million to 86 million barrels of oil equivalent, as much as 22 percent higher than last year. Production rose 4 percent to 36.5 million barrels in the first half, when increased prices and gains on foreign exchange and hedging boosted profit by A$499 million.

Construction of the A$12 billion Pluto LNG project is about one-quarter complete, while Woodside is working on potential development designs for both the Sunrise and Browse LNG projects.

Work for Sunrise in the Timor Sea is focusing on either a floating project or the expansion of ConocoPhillips' LNG plant in Darwin, while the Browse venture may select a development site by the end of the year, it said.

Carbon Threat

Development of Browse, Woodside's biggest project, may be threatened by the government's proposed carbon trading system, Voelte said. The company may ``dramatically'' cut planned spending on Browse, a venture estimated to cost as much as $30 billion, if the trading system isn't re-designed, he said.

Woodside said it is examining options for raising between A$1 billion and A$2 billion in debt finance in the second half, mostly for the Pluto LNG project, after signing loan agreements totaling $1.5 billion in June. It reinstated a dividend reinvestment plan and said thus will be activated as required for funds for the construction of Pluto.

Capital expenditure, which was A$2.4 billion in the first half, will be higher in the second because of Pluto, Chief Financial Officer Mark Chatterji said on the call. Total spending this year may rise to about A$5.4 billion, from about A$3.3 billion last year, according to a Woodside presentation.

Wheatstone, Iago

Voelte said May 1 the company may miss its end-2008 target for approving an expansion of Pluto while it weighs the best option for gas supply. Drilling in the area has so far failed to yield discoveries while Chevron Corp. decided to build its own LNG project for its Wheatstone and Iago fields nearby. Talks are continuing with third parties for gas supply, Voelte said today.

Woodside declared an interim dividend of 80 cents a share, up from 49 cents a year earlier. Sales rose 45 percent to a record A$2.57 billion, while per-share earnings rose to A$1.49 from 92 cents. Profit excluding one-time items jumped 86 percent to A$1.01 billion.

Woodside said it is ``considering options'' for its remaining assets in Africa, including those in Libya, after selling out of Mauritania and exiting Kenya.

The government's planned tax on condensates, a type of light crude oil, produced at the North West Shelf venture is ``ill-conceived'' and the additional cost will have to be passed on to customers when gas supply contracts are renewed, Voelte said.

The company is considering developing the Laverda oil field off Western Australia by connecting it to the production system at the BHP-operated Stybarrow venture, he said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net