Aussie energy companies boost topline on surging prices
Just like most of their global peers, Australian energy companies too have reported a sharp jump in topline in the July-September quarter on surging oil, gas and LNG prices. The country’s three biggest firms Woodside, Santos and Origin have seen a big growth in quarterly revenues. This comes against the backdrop of projected gas shortfall in the domestic market and calls for curbs on LNG exports.
Australia’s biggest gas producer Woodside’s revenue in the July-September quarter came in at $5.85bn, up 272.2% year/year thanks to high commodity prices. The company produced 51.2mn boe during the quarter compared with 22.2mn boe a year earlier. Woodside’s average realised price was $102/boe in Q3 versus $59/boe last year.
Woodside CEO Meg O’Neill said production and revenue rose in the third quarter, reflecting the first full three months of contribution from the former BHP petroleum business. Woodside completed the merger with BHP’s oil and gas portfolio in June this year.
The Perth-based company has upgraded its full-year production guidance. It now expects to produce between 153mn boe and 157mn boe in 2022, up from a prior forecast of between 145mn boe and 153mn boe.
Santos reported record revenue in the July-September quarter. The company realised over 88% yr/yr jump in topline.
The company’s revenue was $2.15bn compared with a revenue of $1.14bn a year earlier. Santos said its realised LNG price in Q3 was $16.76/mn Btu, up from $10.36/mn Btu in the same quarter last year. The average realised oil price jumped over 41% yr/yr.
Australia Pacific LNG (APLNG) project revenue in the July-September quarter came in at A$2.77bn ($1.78bn), up 64% yr/yr on the back of higher oil and LNG prices, Origin Energy, one of the partners in the project, said late last month.
APLNG, a joint venture comprising Origin, ConocoPhillips and China's Sinopec, is Australia’s largest producer of coalbed methane (CBM) and supplies gas to Queensland’s domestic gas market, while also processing CBM into LNG for exports. Origin owns a 27.5% stake in APLNG.
Origin reported an 18.8% yr/yr rise in revenue from its stake in the APLNG. The company said revenue from APLNG came in at A$581mn during the quarter from A$489mn a year ago.
Sydney-based Origin expects an increase in energy markets earnings for the financial year 2023 on the back of higher gas prices. Origin earlier this year withdrew all guidance for the year to June 2023 due to uncertainties in the global and Australian energy markets.
Origin now expects underlying earnings before interest, taxes, depreciation, and amortisation (EBIDTA) for its energy markets division between A$500mn and A$650mn in the financial year 2023, compared with A$365mn a year earlier.
“The improvement in energy markets underlying EBITDA compared to the prior year is driven by an expected increase in natural gas gross profit. Electricity gross profit is expected to remain suppressed reflecting higher energy costs only partially priced into regulated tariffs,” it said.
In the 2024 financial year, Origin anticipates further growth in energy markets underlying EBITDA.
No curbs on LNG exports
In July this year, the Australian Competition and Consumer Commission forecasted a gas shortfall of 56 petajoules for the domestic market in 2023, mainly in the eastern and southern states. This resulted in calls for curbs on LNG exports from the three projects located on the Australian east coast. That situation has been avoided for now as the federal government in September signed a new heads of agreement with the three east coast LNG exporters to ensure sufficient gas supplies for the domestic market.
The new commitments from LNG exporters will lead to an extra 157 petajoules for the domestic market in 2023, with the gas to be supplied in line with seasonal demand, the government said.
“This agreement will ensure Australians continue to have access to secure and reliable gas,” Australia’s resources minister Madeleine King said. “The new supply commitments, and heads of agreement, will deliver gas to the domestic market when needed, and ensures future uncontracted gas will be offered to the domestic market first, on competitive and reasonable terms, before it is offered for export.”
According to the heads of agreement, LNG exporters have to first offer uncontracted gas to the domestic market, on competitive terms, with reasonable notice, before exporting. In respect of uncontracted gas, domestic gas customers will not pay more for the LNG exporters’ gas than international customers.
King said there was no intention to invoke the Australian Domestic Gas Security Mechanism (ADGSM). A decision on using the trigger had to be made before October 1.
“Given the agreement means the projected shortfall will be avoided, I am satisfied I do not need to take steps to activate the Australian Domestic Gas Security Mechanism at this time,” she said.
The ADGSM gives the federal government the power to impose LNG export curbs. If the government assesses that there will be a shortfall in domestic gas supply in a calendar year and that LNG exports contribute to the shortfall, the exports will be restricted for that year. Since the introduction of the ADGSM in 2017, the Australian government has not declared a domestic shortfall year.
LNG exporters to pay extra A$9bn as tax
Higher revenues and profits mean these companies will contribute substantially to government coffers during this financial year. Australia’s LNG exporters are set to almost triple their financial contribution to the public this financial year, forecasted to pay an extra A$9bn to federal and state governments, the country’s peak oil and gas body Appea said in early October.
New preliminary forecasts, compiled by Appea, reveal the gas export sector is estimated to pay around A$13bn during 2022-23 – up from the A$4.8bn forecast for the last financial year.
The total includes corporate income tax, the petroleum resource rent tax, state royalties and excise for companies who operate with December 30, 2022 financial years or June 30, 2023 financial years, Appea said.