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Woodside, Santos Set Sales Records on Strong Year-End LNG Prices
Stronger commodity prices and sizable mergers helped two of Asia’s biggest liquefied natural gas (LNG) suppliers, Woodside Petroleum Ltd. and Santos Ltd., end 2021 with ballooning sales revenues.
Both Australian companies built on the momentum of a stronger than expected 2020 by capitalizing on the market fluctuations of 2021, cashing in big at the end of the year with premiums on LNG prices.
Woodside saw a 93% jump in its LNG sales revenues during the last three months of the year, which accounted for $2.354 billion of its 4Q2021 sales and more than 56% of all of its product volumes sold during the period. That boost helped Woodside set a new record for quarterly sales revenues of $2.852 billion in the fourth quarter.
It ended 4Q2021 with a realized price for LNG of $93/boe, $65/boe higher than the same period last year. It was a $36/boe increase over 3Q2021.
“This increase in realized price demonstrates the continued strong demand for LNG and improvement in the trading environment over the course of 2021,” Woodside CEO Meg O’Neill said.
Woodside sold around 17% of all of its LNG on a spot basis in 2021.
Woodside actually saw less LNG production in 2021 at 70.8 million boe, chilling about 4.2 million boe less than 2020. That reduction was thanks in part to commissioning activities for the Julimar-Brunello Phase 2 project at the Wheatstone LNG facility in Western Australia and lower utilization of offshore capacity.
Woodside is guiding for 71-74 million boe of LNG production this year. It has also secured an agreement with Commonwealth LNG, LLC to purchase 2.0 million metric tons/year (mmty) of LNG if the Louisiana terminal launches in 2026.
Similar rising tides also gave Santos both a quarterly sales revenue record of $1.5 billion, up 34% from 3Q2021, and record annual sales revenue of $4.7 billion. Its sales revenue grew by 39% compared to the previous year.
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Santos’ LNG sales volumes rose marginally, increasing from 4.3 MMt in 2020 to 4.5 MMt at the end of last year, but the value of those volumes increased exponentially. LNG sales revenue increased by almost 65% in 2021 compared to the previous year.
Santos disclosed $2.2 billion in LNG sales revenues for last year, with $791 million alone coming from 4Q2021. It was an increase from $574 million for 3Q2021.
Santos’ average realized LNG price increased by 32% sequentially in the fourth quarter to $13.64/MMbtu. Average realized LNG prices in 2021 were $9.25/MMbtu, rising from $6.39/MMbtu in 2020.
Most of the fourth quarter revenue bump was attributed to demand from Asia. Santos’ LNG projects shipped 68 cargoes in the fourth quarter, with 12 cargoes sold at prices linked to the Japan-Korea Marker.
Santos and Woodside produced similar totals of combined product volumes – which includes oil, natural gas and other hydrocarbons – during 4Q2021, coming in at 22.9 million boe and 22.6 million boe, respectively.
Looking ahead, both companies aim to make up lost ground on major expansion projects and progress with carbon offset initiatives, especially following the momentum gained from their respective mergers.
Santos announced on Dec. 10 that it had officially completed its merger with Oil Search Ltd., the operator of Papua New Guinea’s oilfields and a stakeholder in the Pikka Unit on the North Slope of Alaska. Oil Search was also a partner in the ExxonMobil-operated PNG LNG project and the TotalEnergies SE-led Papua LNG.
“Our merger with Oil Search delivers increased scale and capacity to drive a disciplined, low-cost operating model and unrivalled growth opportunities over the next decade – with a vision of becoming a global leader in the energy transition,” Santos CEO Kevin Gallagher said.
Woodside and BHP Group also announced last year that they would merge their natural gas and oil portfolios in an all-stock transaction estimated to be worth $28 billion, to create one of the biggest producers in the world.
If completed, the deal could make Woodside the largest energy company on the Australian stock exchange. Woodside expects the merger to be completed in 2Q2022, when shareholders are expected to vote on the transaction.
Projects and FIDs
In the meantime, Woodside reported construction on the Pluto-KGP Interconnector pipeline between the Pluto LNG terminal and the Karratha Gas Plant north of Perth is ahead of schedule and that commissioning has begun.
The company sanctioned the Scarborough LNG project in November. Scarborough includes development of a large dry gas field off the coast of Western Australia and an expansion of Woodside’s Pluto export facility.
In the same month, Woodside sold a 49% stake of the Scarborough expansion project to investment firm Global Infrastructure Partners (GIP), which was looking to fill the growing need for low-carbon fuels in Asia.
Santos is also looking to make progress this year on the Barossa project, a $3.6 billion gas field development off of Australia’s northern shores meant to feed its Darwin LNG export terminal. In January management reported Barossa was 20% complete.
Woodside Exits Myanmar
Woodside announced Wednesday (Jan. 26) a definitive decision to withdraw interests from Myanmar, ending almost a decade of operations in the country.
“Given the ongoing situation in Myanmar we can no longer contemplate Woodside’s participation in the development of the A-6 gas resources, nor other future activities in-country,” O’Neill said.
Woodside announced in February 2021, shortly after a military coup in the country, that it was placing its business decisions in Myanmar under review.
The announcement follows similar news from TotalEnergies and Chevron Corp. on Jan. 21 about divestments from the country’s gas-rich resources offshore.
Woodside disclosed 2021 net profit after tax could be impacted by an estimated $138 million after it arranges to end its own investments and a joint venture and production sharing contract (PSC) with Myanma Oil and Gas Enterprise in the Rakhine Basin.
That impact is on top of $71 million in exploration and evaluation expenses for Block AD-7 in Rakhine the company disclosed for 4Q2021.
It reported in 2019 to be the largest acreage holder in the basin, with interests in nine offshore blocks.
Neither Woodside nor Santos disclosed net income or loss results in their fourth quarter reports. Both companies plan on releasing complete financial results for 2021 in mid-February.
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