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Santos plans Barossa sale & Woodside Q1 results in focus

We examine Woodside’s latest quarterly results and Santos’s plan to reduce its Barossa stake.

Oil prices remain under pressure

As it turns out, the OPEC+ production cut agreement – which would see production slashed by 9.7 million barrels per day across May and June – hasn’t had much luck stabilising oil prices.

Indeed, oil futures continue to trade in a volatile manner: WTI's May Nymex contract was up around 0.50% to US$19.94 per barrel at 2:50AM (EDT). Similarly, Brent Crude's June ICE contract pulled back from significant losses from the day prior, trading at US$27.83 per barrel at 2:50AM (EDT).

Mind you, as we wrote at the start of April and citing ING Research:

‘Even if Russian and Saudi Arabia can come to a production cut agreement, ING notes that it would “still likely not be enough to bring the market back to balance”.’

With oil prices still off around 50% from recent highs, such a point looks well vindicated right now, in spite of a paltry uptick in futures prices.

With this volatility in mind, below we take a look at some of the recent developments from Australian gas and oil large caps – Santos (STO) and Woodside Petroleum (WPL).

Woodside share price: quarterly data at a glance

Though Woodside today reported that its Q1 production was up on a year-over-year basis; it disappointingly but unsurprisingly revealed that its revenue had declined steeply since Q4 CY19.

Specifically, Woodside noted that its Q1 2020 sales revenue had declined 23.6% from the prior quarter, coming in at US$1,076 million. These lower revenue figures, said the company’s CEO, were driven by 'reduced trading activity and lower realised prices due to COVID-19 and an unprecedented combination of oversupply and short-term demand destruction.'

Positively at least, the energy giant revealed that that it produced 24.2 million barrels of oil equivalent in the first quarter. Better still, the company noted that its 2020 production guidance remains unchanged.

Finally, and as it currently stands, WPL has currently has 13.35 million barrels of oil hedged – over the April to December period.

The Woodside Petroleum share price finished out Thursday’s session down 1.23% – at $20.95 per share.

A new day a new deal: the Santos share price dips

Elsewhere, Santos today revealed that it had signed a letter of intent with JERA International, to sell 12.5% of its Barossa stake.

Further to that, Santos pointed out that:

'JERA already has a 6.1% interest in Darwin LNG. Santos' signing of the LOI with JERA advances partner alignment between the Darwin LNG and Barossa joint ventures for the development of Barossa as backfill for Darwin LNG.’

Should the deal be finalised, Santos would be left with a 50% interest in the Barossa project. Even so, it should be noted that the firm is aiming to reduce that interest to approximately 40%, so as 'to achieve increased partner alignment and prudent future allocation of growth capital.'

Santos shares ended out the day 3.19% lower at $4.25 per share.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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