To Woodside shareholders, Voelte is the man who sparked life into a business which a few years ago, was starting to look constipated. Exploration success was proving elusive, production seemed to be heading into a black hole, and the stock market was getting nervy.
Enter Voelte, hot from Texas, with a reputation for getting things done, which is precisely what has happened.
Under Voelte, Woodside has been transformed. Old wood has been pruned, new wood recruited. Exploration success has been enjoyed at Pluto, and old prospects such as Brecknock and Scott Reef dusted off. Even the disgraceful demands from East Timor for an unfair share of production from the proposed Sunrise project have been seen off.
It’s easy when considering a list like that to understand why Woodside shareholders believe that Voelte can walk on water.
But Slugcatcher thinks Voelte’s contribution might be just a little over-stated and that forces even greater than the Woodside CEO have been at work – such as the price of oil.
Without wishing to rain too hard on Voelte’s parade, it is important to consider just how Woodside would look without the higher oil price, and how it might look should the oil price return to its long-term trend price – unlikely as that currently seems.
A good starting point to gain a greater understanding of just how Woodside has really performed can be gleaned from the company’s own production and financial data.
On the financial front there is one stand-out item – the share price, which has rocketed along from a 12-month low in 2005 of $22.52 to a high of $47.87, a better than double your money experience.
Much, if not all, of that share price rise, is attributed to future possible earnings from developments such as the Pluto liquefied natural gas project, and oil from Mauritania.
It is the potential of future earnings that underpins the share price because a look at how the company has really performed over the past few years is far more sobering – perhaps what might even be called ordinary.
Profit, as measured after tax (is there any other meaningful way?) was down marginally in 2005, falling from $1.14 billion to $1.10 billion – a slip blamed on the pre-Voelte days.
Production, too, was quite ordinary. LNG sales were up strongly but the key measure, production of everything converted to barrels of oil equivalent (boe), was up marginally and below the levels of earlier years as old oil fields declined.
At 59.7 million boe total, Woodside output was up just 4% on the 2004 level, and 10% below the peak year of 2001 when there was a total of 66.3 million boe, a figure achieved thanks largely to the Laminaria field.
On the reserves front, there are also questions worth asking, such as why gas reserves have eased from 5.1 trillion cubic feet to 4.7 tcf, perhaps it is just a timing question of when to convert resources to reserves. But there has also been a similar decline in condensate, offset by a rise in oil reserves.
Greater things probably lie ahead for Woodside. It has enjoyed exploration success and it is rushing to bring new projects into production.
However, it was the very rush to go it alone on Pluto, kickstart the moribund Brecknock project and restart negotiations on Sunrise that got The Slug thinking that perhaps there has been an awful lot of talking up the future – because the present does look rather average, if not for the oil price.
Ahh, say friends of Woodside, it’s the future we’re applauding. To which The Slug responds: Then you had better pray that the oil price stays high to justify your enthusiasm and enormous capital requirements to bring on a series of LNG projects.
