Woodside Energy CEO Meg O’Neill expressed confidence in the profitability of the Driftwood liquefied natural gas (LNG) project, despite concerns following the company’s announcement of a $1.2 billion acquisition of LNG developer Tellurian and its U.S. Gulf Coast Driftwood project. This move aims to position Woodside as a “global LNG powerhouse.”
Following the announcement, Woodside’s shares fell by 2.1%, with analysts from Citi and UBS questioning whether the project could surpass Woodside’s 12% investment hurdle rate. O’Neill reassured stakeholders that Driftwood would meet this investment threshold.
The company plans to adopt a hybrid approach for Driftwood, keeping a larger portion of its production uncommitted to market it opportunistically, rather than securing long-term contracts. O’Neill emphasized that this strategy would enable the company to leverage its existing LNG capabilities for higher margins.
Recent agreements with Korea’s Kogas and Taiwan’s CPC Corporation demonstrated Woodside’s ability to sell LNG at competitive prices, although O’Neill did not disclose the specific capacity intended for trading.
This acquisition comes five months after failed merger discussions with Santos, though O’Neill indicated that future deals remain a possibility, with the primary focus currently on integrating Tellurian.
In its second-quarter results, Woodside reported a 4% increase in estimated costs for the Scarborough project, now totaling $12.5 billion, attributed to modifications at Pluto Train 1. Analysts anticipate further cost overruns, projecting a potential $1 billion budget increase.
Despite these challenges, Woodside reported Q2 revenue of $3.03 billion, up from $2.97 billion in the previous quarter, primarily due to sales timing from the Pluto project, although this was partially offset by lower energy prices. The company maintained its full-year production guidance of 185-195 million barrels of oil equivalent (MMboe) and did not alter its capital expenditure forecast.