WPL Woodside Petroleum Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--Woodside Petroleum Ltd. (WPL.AU) anticipates production levels will recover from next year as its investment in Australian oil and gas projects starts to deliver.

The Australian energy company has projects that will soon begin adding growth, offsetting any decline in other parts of the business, said Chief Executive Peter Coleman. That's even as Woodside remains on the lookout for further undeveloped oil-and-gas assets that will bolster its reserves, he said in an interview.

At the heart of near-term growth is Chevron Corp.'s (CVX) US$34 billion Wheatstone gas-export project, which is expected to produce its first liquefied natural gas midway through the year from a first production line and then add a second line early next year. The project, which was joined by Woodside in 2015, also is set to provide natural gas to the domestic market in Western Australia state from 2018.

Woodside will then add output from the US$1.9 billion Greater Enfield oil development with partner Mitsui Australia. First oil from the fields off the northwestern coast of Australia is expected in mid-2019.

"The degree of growth will be a function of how quickly the projects start up and how reliable they are," Mr. Coleman said.

The Perth-based company has forecast production would fall to between 84 million and 90 million barrels of oil equivalent in 2017, after rising 3% to 94.9 million last year. It said production of LNG are likely to build on a record level last year, but will be offset by a decline in oil output and a drop in domestic natural gas as its equity stake in pipeline volumes from the North West Shelf project in Australia's west falls as planned.

Woodside, Chevron, Royal Dutch Shell PLC (RDSA) and other major energy companies have in recent years invested tens of billions of dollars in massive liquefied natural gas developments in anticipation of continued strong energy demand from Asia. As the various plants around the country ramp up output they have positioned Australia to overtake Qatar as the top exporter of the chilled gas in the next few years.

In Western Australia, Woodside has stakes in the North West Shelf LNG project, which has been operating since 1984, and the Pluto LNG plant that began producing in 2012. It closed a US$2.8 billion deal in 2015 with Apache Corp. (APA) that includes a 13% stake in the Wheatstone project, as well as interests in the Kitimat LNG project in Canada.

Mr. Coleman said that over the last two years the company had added the equivalent of 20 years production to its resources base with assets across offshore Western Australia, Kitimat and with US$350 million deal last year to buy ConocoPhilips' (COP) interest in three promising oil discoveries off Senegal. Added to that, the company plans a drilling campaign for gas in Myanmar this year.

"We have in many ways refilled the cupboard," he said. "We don't need to be in the market acquiring any more this year...[but] we haven't stopped looking."

Mr. Coleman said there remained a window of opportunity to pick up oil-and-gas assets this year, as companies still burdened by debt look at ways to free up cash and as buyers grow more confident on the oil price, following the slump from over US$100 a barrel in the summer of 2014 to less than US$30 a year ago.

Woodside is well positioned should a compelling asset come along, he said, after it took advantage of low interest rates last year to extend the tenure of its debt and with free cash-flow break even at US$35 a barrel.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 19, 2017 00:01 ET (05:01 GMT)

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