In fact, rather than just have a dig at Woodside and its misfortunes, The Slug can also imagine the board of Australia’s second-biggest dedicated petroleum corporation, Santos, making similar suggestions about the need to sharpen the company’s performance.
As far as The Slug can tell from reading the signals coming out of Woodside and Santos (and after reference to a Vestal Virgin and the entrails of freshly slaughtered chicken), there is trouble afoot at both companies.
Just what will happen is uncertain but the best measure of the trouble seen by The Slug is in the share prices of both companies, a measure of corporate performance watched very carefully by directors and shareholders.
In the case of Woodside, the stock has been in virtual free-fall since peaking at $49.80 on April 19, to a closing price on Friday of $36.14. One way of looking at the slide is to say Woodside has dropped $13.66 – another way is to say that more than $9 billion has been wiped off the value of the company in seven months: over $1 billion a month.
The problems, which The Slug has explored in earlier rants, are nearly all related to management matters. Oil fields that produce water earlier than predicted, takeover bids that fail, oil fields that fail to meet production targets, LNG projects that struggle to get off the ground, and personal slanging matches with powerful politicians.
Treated separately, each issue has an explanation. But taken as a whole, a pattern is emerging. This pattern isn’t pretty and it will already have attracted the attention of the chaps at Shell in The Hague – not that they have much in the manner of world-class management to lay claim to.
Santos, likewise, has a growing cabinet of little horrors, some of its own doing, some in the manner of guilt by association.
The ghastly gas blow-out problems in Indonesia are hardly the making of Santos management, but they did get into bed with partners who are now seen to be incompetent.
The reserve shortfall in the Jeruk oil field, also in Indonesia, is a bit more of a Santos affair, as is the failure to acquire Delhi Petroleum, and the troubles with attempts to buy Queensland Gas.
As with Woodside, there is a pattern of trouble that has not escaped the market, which has marked Santos down from a high of $13.68 on February 2 to a closing sale on Friday of $10.43, a decline of $3.25 a share – or the destruction of $1.9 billion in shareholder wealth.
Perhaps it is unfair to point out that between them, Woodside and Santos have now shed close to $11 billion in market value since hitting their price peaks, and it’s the sound of money flushing around the S-bend that keeps shareholders awake at night – and knocking angrily at the door of management the next morning.
The views expressed by Slugcatcher are not those of APPEA nor of PetroleumNews.net
