Woodside Energy CEO backs $1.2 bln Tellurian deal after Q2 revenue rise
July 23 (Reuters) - Woodside Energy CEO Meg O'Neill said concerns about the profitability of its Driftwood liquefied natural gas (LNG) project are misplaced, as the energy firm flagged higher costs at its Scarborough project during second quarter results on Tuesday.
A day earlier, Australia's largest independent energy firm signed a $1.2 billion deal to buy LNG developer Tellurian and its U.S. Gulf Coast Driftwood project in a move to become a "global LNG powerhouse".
|
Advertisement: The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business. |
Woodside shares fell 2.1% after the news and analysts from Citi and UBS questioned whether the infrastructure-like project could generate returns above Woodside's 12% investment hurdle.
O'Neill said the project would hit the company's investment hurdle rate.
Woodside planned to keep a larger-than-usual chunk of Driftwood's production uncommitted and market it opportunistically, as opposed to the standard practice of locking it in to long-term contracts.
"The way we're thinking about this is not as a traditional U.S. LNG project," she told Reuters.
"This is going to be a hybrid. We're going to take some of the capabilities that we have in our existing LNG business to Driftwood which will allow us to capture those higher margins."
O'Neill said recent deals with Korea's Kogas and Taiwan's CPC Corporation showed Woodside could sell LNG at attractive prices. She declined to say how much capacity Woodside planned to reserve for trading.
Coming five months after merger talks with local rival Santos STO.AX ended, O'Neill said the door was not closed on more deals although integrating Tellurian was the main focus.
In second quarter results released earlier on Tuesday, Woodside Energy reported a 4% jump in the estimated cost of its Scarborough project to $12.5 billion.
Shares were down 2.9% by 0315 GMT.
The roughly $500 million increase at Scarborough stemmed from the work under way to modify the existing Pluto Train 1.
Analysts at Citi said further overruns were likely and they expected the project to ultimately run $1 billion over budget.
Revenue rose to $3.03 billion for the three months ended June 30, versus $2.97 billion in the March quarter.
Woodside attributed the jump to the timing of sales from its Pluto project, however the gains were offset by lower energy prices.
Woodside maintained its full-year production guidance of 185-195 million barrels of oil equivalent (MMboe) and also made no changes to its capital expenditure forecast.
(Reporting by Echha Jain and Adwitiya Srivastava in Bengaluru; Editing by Devika Syamnath, Alan Barona and Jacqueline Wong)