By David Winning
SYDNEY--Woodside Petroleum Ltd. said it was deferring three major projects to expand its liquefied natural gas production by at least one year as it seeks to conserve cash until the coronavirus pandemic is contained and oil prices recover.
Woodside said it won't decide whether to proceed with construction of the Scarborough gas project offshore Western Australia state until 2021, while pushing back the timing of a decision on a second processing unit at the active Pluto LNG facility to the same time.
A final investment decision on developing the Browse gas resource will also be delayed, but without a new target date.
Woodside said its response to the pandemic and steep fall in oil prices would cut its total expenditure this year by around 50% to US$2.4 billion. The Perth-based company had US$4.9 billion cash on hand at the end of February, and total liquidity of US$7.9 billion.
"Our disciplined approach to cash flow and debt management has positioned us to respond quickly and decisively," said Chief Executive Peter Coleman. "The development of the Scarborough and Browse gas resources through Woodside's proposed Burrup Hub remains among the world's most cost-competitive LNG investment opportunities."
Australian energy companies have moved quickly to conserve cash amid a forecast demand drop and supply glut of crude oil and natural gas. The price of Brent crude--the global benchmark--fell to US$26.34/bbl on Wednesday, and is down 60% since the start of January. A big trigger for the price falls was Saudi Arabia's decision to lift output after talks with Russia over market share broke down.
Santos Ltd. this week said it expects to delay a final investment decision on its Barossa natural-gas project among initiatives designed to save US$550 million this year. Some days earlier Oil Search Ltd. said it now expects investment expenditure of US$440 million-US$530 million in 2020, down from a prior forecast of US$710 million-US$845 million.
Woodside said it expects the oil price to be volatile in the near term at least, and it had separately moved to increase certainty around its revenue. This included hedging 11.85 million barrels of oil between April and December 2020 at an average price of US$33.47 per barrel.
The company has also agreed with a customer to fix the price of LNG production equivalent to approximately 2.4 million barrels of oil equivalent over the same period.
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