Investors watch LNG projects as Australian E&P players report: analysts
Saturday, 18 February 2012 | 00:00
Investors will be watching Australia's three biggest listed upstream companies for news of progress on their LNG projects when they report results over the coming week, Hong Kong-based analysts Bernstein Research said in a report.
Woodside Petroleum, Santos and Oil Search have experienced declines in production during 2011 of between 13% and 5%, although higher commodity prices have more than offset the falls, Bernstein said. The analysts added that they expected Oil Search to deliver the strongest full-year earnings growth of 50% on a per share basis.
LNG project execution will remain the focus, but Bernstein does not expect any changes in the previous guidances.
Woodside is nearing completion of its 90%-held A$14.9 billion ($15.9 billion) Pluto LNG project in Western Australia. The Pluto foundation project comprises one 4.3 million mt/year production train and is due to ship its first cargo in March.
Santos operates and holds 30% of the coalseam gas-based Gladstone LNG project on Australia's east coast. The $16 billion project will produce 7.8 million mt/year of LNG from two trains and is scheduled to start up in 2015.
Oil Search owns 29% of the ExxonMobil-led Papua New Guinea LNG project, which is expected to cost $15.7 billion and start up in 2014. The project will produce 6.6 million mt/year of LNG from two trains.
The Bernstein analysts said they did not expect any significant changes to the costs and schedule of the major LNG projects underway. But "given the continued challenges of cost inflation and the large number of projects running concurrently, we continue to expect negative surprises on LNG projects," they added.
The companies' growth plans are also set to come under greater scrutiny given increased international LNG competition and their need for exploration success to deliver the required reserves.
"We expect Oil Search to confirm PNG LNG startup timing and provide an update on exploration activities to deliver train three," Bernstein said.
"For Woodside, we expect more details on growth priorities beyond Pluto 1. With Pluto 1 almost complete, the question for Woodside is increasingly what comes next," they added. "While we continue to be skeptical on development plans for Browse other than North West Shelf, any cooperation agreement with other resources owners on Pluto expansion could be a positive."
Woodside is conducting front-end engineering and design work on a greenfield 12 million mt/year LNG project in Western Australia's Kimberley region, based on gas in the offshore Browse Basin. But the proposal remains controversial among local traditional landowners and environmentalists, and some of the company's joint venture partners -- BP, BHP Billiton, Chevron and Shell -- have previously expressed a preference for the gas to be processed at the existing North West Shelf facilities.
"For Santos, confirmation that GLNG remains on track and reserve adding options remain key," Bernstein said. "While it is too early to expect a meaningful update on GLNG costs or schedule, we do expect further commentary on options to address any reserves shortfall or future growth."
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