Woodside expects low oil and gas prices into 2021

Australia’s largest LNG player Woodside expects low oil and gas prices to continue for the rest of 2020 and into next year due to the Covid-19 coronavirus pandemic.

Cripling worldwide demand caused by the Covid-19 restrictions has seen oil, gas and LNG prices at its lowest levels for decades. Demand slump also lead to a major oversupply in the market.

“The agreement earlier this month between OPEC, Russia and other producing countries will help reduce the extent of the oversupply but the demand destruction we are seeing is so significant that low oil prices are likely to persist this year and possibly into next”, Woodside head Peter Coleman said Thursday during the company’s annual meeting of shareholders.

“To be frank, this extraordinary confluence of events is the worst situation I’ve seen for our industry in the 36 years I’ve been in this game”, he said.

North Asian spot LNG prices fell more than 60 per cent this week since the beginning of this year to less than $2 per million British thermal units.

Brent crude prices were $24.87 a barrel in light trading on Thursday. For comparison, Brent was near $60 per barrel in mid-February.

Woodside, which operates the North West Shelf LNG project and the Pluto LNG project, reported a 21.1 per cent decrease in revenue in the first quarter hit by the lower prices.

Woodside also slashed its 2020 spending by 50 per cent and delayed final investment decision on its Scarborough and Pluto LNG Train 2 developments.

However, the company says it has entered this period of “significant uncertainty” with one of the stronger balance sheets in the industry.

“At the end of March, we had over $4 billion cash on hand, over $7 billion of liquidity and gearing at the low end of our target range”, Coleman said.

“In the past year, we have stress-tested our balance sheet against a number of scenarios, including two years of oil prices at $35 with ongoing oil prices beyond that of $50 flat real, to ensure the robustness of our investment strategy”, he said.

Coleman added that any investment decision by the company would depend on further analysis of a range of factors, including a view of likely oil price into the future.