Woodside, Santos face earnings dip; growth projects in focus
Investors are seeking greater clarity regarding dividend payouts due to the lingering risks associated with key growth projects.
John Lockton is the head of Sandstone Insights' investment strategy. He believes that lower energy prices will be the primary cause for a decline in annual profits.
He said that "flat volumes combined with flat prices for energy leave revenue growth flat in US$ terms (for both companies)."
Visible Alpha's consensus estimates predict that Woodside will report a underlying net loss of $2.96billion for fiscal 2024. This is down from $3.32billion last year.
Woodside's line-item projection, released on Monday by the company, said that it expected higher restoration costs and "other expenses" to be $1.7 billion-$1.9 billion, both higher than estimates.
The company's projection that its Sangomar Project in Senegal will maintain a plateau of production until the second quarter 2025 has raised doubts about its growth plans.
Cash flow will be affected by higher restoration costs, and a possible earlier Sangomar decline could also cause a drag. Citi analysts wrote in a report that this will raise concerns about the sustainability and the payout ratio.
Analysts at Jarden said that Woodside has yet to determine whether tariffs could have an adverse impact on the sale of a stake in its Louisiana LNG project. Investors are waiting for proof that Woodside is controlling costs.
Woodside now owns 100% of the Louisiana LNG Project after acquiring Tellurian Inc for $1.2 billion in October. However, it is still looking to sell 50%.
Analysts at Jarden said that investors will focus on the progress of Santos' Pikka Phase 1 Project in Alaska to see if an acceleration of oil production by late 2025 can be achieved.
Santos announced last month that the first gas would be produced from its $4.3 billion Barossa Project, which is nearly complete. This will happen in the third quarter of this year.
Lockton, of Sandstone, said: "We believe that Santos’ production and capital spending estimates for its legacy fields may be too optimistic. They could need to be revised."
The new capital management strategy of Santos, which is expected to increase the distribution per share payment by 20%, will be displayed.
According to consensus estimates Santos will report a underlying annual profit of $1.32billion, a lower figure than the $1.42billion reported last year.
Santos will release its annual earnings update on February 19, and Woodside, respectively. Reporting by Shivangi lahiri in Bengaluru, writing by Himanshi Akhand and editing by Jacqueline Wong.
(source: Reuters)
