PERTH (miningweekly.com) – Oil and gas major Woodside has announced a number of measures to protect its balance sheet during the Covid-19 pandemic, including the deferral of targeted final investment decisions for its Scarborough, Pluto Train 2 until 2021, as well as delaying the final investment decision for the Browse liquefied natural gas (LNG) project.
The company on Friday also announced that total expenditure for 2020 would be cut by 50%, to around A$2.4-billion. These cuts would include a near A$100-million reduction in operating expenditures and a 60% cut in investment expenditure, to between A$1.7-billion and A$1.9-billion.
“The unprecedented circumstances that have unfolded globally over recent weeks are impacting our people, our business and our industry,” said CEO Peter Coleman.
“Our immediate priorities have been minimising the risk from Covid-19 to staff, contractors and the communities where we operate, and maintaining our ability to deliver gas to the Western Australian and overseas customers who depend on us.
“We are also responding to the lower, more volatile oil price environment by taking difficult but prudent decisions to reduce our expenditure for this year, and to delay targeted final investment decisions on our growth projects at Scarborough, Pluto Train 2, and Browse,” Coleman said.
In addition to the delayed final investment decisions, the reduced capital expenditure for 2020 would also result in changes to the planned turnaround schedule at the Karratha gas plant, with the major turnaround for the LNG Train 3 now deferred to September 2020, and the major turnaround for LNG Train 4 deferred to August 2021.
The ASX-listed company would also reduce the scope for 2020 of life extension activities at Karratha and would defer most proposed exploration activities, although some seismic acquisition would continue, reducing overall exploration expenditure by around 50%, to A$75-million.
Work on the Sangomar Phase 1 development, which started in early 2020, would continue, with the company saying that it was taking early action to proactively manage the emerging impacts of Covid-19 on the supply chain and project schedule.
Woodside is working with contractors and the government of Senegal to evaluate options to reduce total cost and near-term spend while protecting the overall value of the investment.
In terms of its producing assets, Woodside has maintained its production guidance for 2020 of between 97-million and 103-million barrels of oil equivalent.
“These are extraordinary times, that no one could have foreseen, but Woodside enters this period of significant uncertainty with one of the strongest balance sheets in our industry and world-class, low-cost producing assets, which are resilient to commodity price fluctuations.
“Our disciplined approach to cash flow and debt management has positioned us to respond quickly and decisively. The measures we are implementing will preserve cash during these challenging months and ensure that in the longer term, we can successfully execute the growth strategy we have in place.
“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 and one which will provide significant economic returns to shareholders, governments and communities for decades to come.”