Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Woodside Energy Group Ltd (WOPEF, Financial) reported a net profit after tax of $1.9 billion for the first half of 2024.
- The company declared a fully franked interim dividend of 69 US cents per share, at the top end of their payout ratio range.
- Unit production costs were reduced by 6% despite an inflationary environment.
- The Sangomar project achieved nameplate capacity of 100,000 barrels per day with all 24 wells drilled and completed.
- Scarborough energy project is 67% complete and on track for first LNG cargo in 2026.
Negative Points
- Overall safety performance is not yet meeting expectations, despite some positive results.
- The company expects gearing to go above the top end of their 10%-20% target range due to recent acquisitions.
- There are ongoing challenges with the Scarborough operations environment plan and regulatory approvals.
- Concerns were raised about the impact of the recent acquisitions on the company's balance sheet and dividend sustainability.
- The company faces potential risks from the Senegalese government's interest in renegotiating contracts for the Sangomar project.
Q & A Highlights
Q: Can you provide a breakdown of the $1.7 billion tax paid in the cash flow statement?
A: Of the $1.7 billion paid in tax, $1.5 billion was related to income tax and the remainder was PRRT. This includes a tax payable liability of $1.1 billion from December, which has been paid along with tax payments for the 2020 full year.
Q: What is Woodside's hedging strategy for 2025 and 2026, especially with the upcoming Driftwood FID and maintaining the 80% dividend payout?
A: We have been hedging around 30 million barrels of oil for the last couple of years during this period of higher capital spend. We expect to continue hedging in 2025 and will evaluate 2026 as we get better visibility on our capital spend and revenue from Scarborough LNG production.
Q: Should we expect more hedged volume if there is more CapEx commitment and higher gearing on the balance sheet?
A: Not necessarily more. We have been targeting 30 million barrels as an appropriate level of hedging to cover our base costs and investments. We will assess the appropriate level of hedging for 2026 as we get closer.
Q: How should we interpret the gearing going above the 20% range for a period?
A: Our target gearing range is 10% to 20%, but it is not a hard limit. We may go above it for a couple of years due to investments like Driftwood. We have various levers to manage this, including strong operational performance, phasing of capital spend, cost reductions, and potential sell-downs.
Q: Is Woodside comfortable maintaining the 80% payout policy without a Driftwood sell-down?
A: We aim to have line of sight to the partnership we want before making an investment decision on Driftwood. If we didn't have interested partners, it would not be our intention to go forward at 100%.
Q: Can you provide guidance on the expected reliability of U.S. LNG plants compared to Woodside's targets?
A: U.S. LNG plant reliability varies, with some operators achieving around 95% reliability. Woodside's track record shows our capability to maintain high reliability and maximize value from our facilities.
Q: What is the outlook for Sangomar's production and unit production costs?
A: We are pleased with the well performance at Sangomar but need more time to understand the reservoir and secondary recovery mechanisms. The reduction in unit production costs is due to disciplined cost management across various fronts.
Q: How does Woodside plan to manage the long-term exposure to Henry Hub gas prices with the Driftwood LNG project?
A: We are looking for partners with upstream gas capabilities to manage this risk. We have no current intentions to enter the upstream U.S. market ourselves.
Q: What are the key risks and confidence levels in the current cost estimates for the Scarborough project?
A: We are confident in delivering the project within the $12.5 billion budget. The FPU remains the critical path, and we are closely monitoring regulatory approvals.
Q: How does Woodside determine the inclusion of asset sale proceeds in underlying earnings and dividends?
A: The profit or loss on the sale, not the full cash amount, is included in the underlying dividend calculation. For example, the profit from the LNG Japan sale was around $120 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
