Woodside Profit Wiped Out as CEO Coleman Doubts Oil Recovery

  • Browse LNG project needs further cost cuts, producer says
  • Woodside's full-year results are the worst in 13 years

Woodside Petroleum Ltd. reported a 99 percent decline in full-year profit, its worst result in 13 years, and cast doubt on any recovery this year from the energy price crash that forced it to write down the value of its assets.

Net income at Australia’s second-largest oil and natural gas producer sank to $26 million from $2.41 billion a year earlier, Perth-based Woodside said on Wednesday. Net income excluding one-time items dropped to $1.13 billion, compared with the $1.03 billion median estimate of 12 analysts surveyed by Bloomberg.

Woodside is among energy companies struggling after the collapse in oil prices due to global oversupply. Brent in 2015 averaged $53.60 a barrel, slumping more than 45 percent from the prior year, and prices last month slid to the lowest level in more than 12 years. Woodside is skeptical oil will recover this year and is planning for a $35 price through 2017, according to Chief Executive Officer Peter Coleman.

“While there are signs that there may be a strengthening toward the second half of this year, I’d be very wary of that,” Coleman told reporters on a conference call. “I really don’t think the price has anything at the moment underneath it that would suggest you are going to see a firming in the short to medium term.”

Stock Declines

The shares fell 6.9 percent to close at A$27.49 in Sydney, the most in 15 months, while Australia’s benchmark index dropped 0.6 percent. The stock has lost about 21 percent over the past year, sinking last month to the lowest level since 2005.

Woodside’s proposed Browse liquefied natural gas project in Australia requires further cost reductions and doesn’t have any firm sales, the company said. The oil and gas producer said last year it intends to make an investment decision on the venture with partners including Royal Dutch Shell Plc in the second half of 2016.

Woodside may not make a decision on Browse until the first half of next year, Citigroup Inc. analysts in Sydney including Dale Koenders wrote in a report Wednesday. At current oil prices, Browse is “highly unlikely” to make significant progress toward approval, Mark Wiseman, a Sydney-based analyst at Goldman Sachs Group Inc., wrote in a separate note.

Smaller Deals

With a relatively strong balance sheet and new projects across the industry in doubt, Woodside may seek acquisitions after abandoning its pursuit of Oil Search Ltd. at the end of last year, Morgans Financial Ltd. said last month.

Woodside isn’t looking at “larger opportunities” to acquire assets, seeing a significant spread between buyer and seller expectations, Coleman told analysts on a separate call.

The profit is the worst result since 2002, when Woodside reported a loss, according to data compiled by Bloomberg.

“This is not the time to be reckless with respect to capital deployment,” Coleman said. “This is not the time to make bets that the future is going to be rosier, just simply because we hope it will be.”

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