Woodside Energy 2Q Output Falls, Scarborough Development Costs Rise — Update

By David Winning

SYDNEY--Woodside Energy reported a 1% sequential fall in quarterly oil and natural gas production, while unveiling an increase to the cost of developing its flagship Scarborough energy project offshore Australia.

Woodside said it produced 44.4 million barrels of oil equivalent in the three months through June, lower than output of 44.9 million BOE in its fiscal first quarter. The decline reflected bad weather affecting the North West Shelf liquefied natural gas facility and unplanned outages at the Wheatstone and Julimar projects.

Quarterly sales revenue totaled $3.03 billion, up 2% on the first three months of 2024. The improvement was due mainly to the timing of LNG cargoes from its Pluto facility, partially offset by lower realized prices, Woodside said.

Woodside said total construction costs at Scarborough, which is 67% complete, had risen by $500 million to a new estimate of $12.5 billion. That means its share of development costs is now $8.2 billion, with the increase "significantly driven by scope maturation of the Pluto Train 1 modifications project," Woodside said.

Woodside's quarterly update comes a day after it unveiled an around $900 million deal to acquire Tellurian and its proposed LNG development in the southern U.S., as it bets more on global gas demand staying robust.

Woodside has agreed to buy Tellurian, which owns the planned Driftwood LNG development near Lake Charles, Louisiana, for $1.00 per share in cash. Tellurian has secured permits to produce as much as 27.6 million metric tons of LNG annually, and Woodside aims to be in a position to make a final investment decision on the project's first phase--involving construction of units able to produce 11 million tons of LNG--in the first quarter of 2025.

The deal for Tellurian deepens Woodside's commitment to the U.S. where it majority owns the Shenzi oil-and-gas field, about 120 miles off the coast of Louisiana. It also plans to invest $5 billion in new energy projects by 2030, including a proposed hydrogen project in Oklahoma.

Analysts say acquiring Tellurian is a logical move that adds another LNG project that can offset natural field declines at existing operations. Still, some are skeptical it will deliver hoped-for internal rates of return.

In addition to Scarborough and Tellurian, Woodside is advancing the Trion deepwater oil project in the Gulf of Mexico with first production targeted in 2028. The company recently produced its first barrel of oil from the Sangomar project in Senegal, and said on Tuesday that it loaded its first crude cargo this month for delivery to Europe.

"Subsequent to the quarter, we achieved peak gross rate of 75,000 barrels per day and production ramp-up continues as planned," Chief Executive Meg O'Neill said of Sangomar.

Woodside kept its full-year guidance unchanged, including a target to produce between 185 million and 195 million BOE.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

July 22, 2024 19:41 ET (23:41 GMT)

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