* Underlying profit falls to $1.70 bln, including
* Reaffirms sees 2014 output steady to 7 pct higher
* Expects higher prices from repriced LNG contracts, more
* Shares slip 0.7 pct
(Adds analyst comment, clarifies underlying profit comparison)
MELBOURNE, Feb 19 Woodside Petroleum
reported a 17 percent drop in annual underlying profit, missing
some analysts' forecasts as costs rose and revenue fell, but
forecast an improvement on both fronts in 2014.
Australia's top oil and gas producer, working on the early
stages of new projects off Western Australia, Israel and Myanmar
to drive long-term growth, said it had succeeded in securing
higher prices for renewed liquefied natural gas (LNG) contracts.
That and the resumption of production from its Vincent oil
field would boost profits in the year ahead, said Chief
Executive Peter Coleman.
"We're also growing our margins. Our anticipated average
realised prices across all our products in 2014 are set to
increase," Coleman told reporters.
The new LNG prices were "on trend with current regional
pricing and traditional regional indexation," Woodside said,
indicating LNG prices remained tied to oil prices, rather than
being linked to cheap U.S. natural gas prices, even with North
American competitors set to enter the Asian market.
Coleman also flagged the company plans to embark on a major
cost-cutting effort, much like mega miners such as BHP Billiton
and Rio Tinto , which it will
outline to investors in the June quarter.
Woodside's growth prospects are now pinned to the Leviathan
gas field off Israel, where the first stage of developing 19
trillion cubic feet of gas will involve sales within Israel. A
final investment decision is expected in late 2015 on a floating
LNG project for the first stage of exports.
The floating plant could be used both for exports of LNG to
Asia as well as sending gas by pipeline, with exports to Turkey,
Cyprus, Egypt and Jordan under consideration.
Analysts said Woodside was performing as well as it could
with the assets it has, but there was little to justify any big
move up in its share price in the near term.
"It's hard to see any material positive catalyst in light of
the lack of abundance of growth options," said Credit Suisse
analyst Mark Samter.
Net profit fell 41 percent to $1.749 billion, as the 2012
result was boosted by the sale of a stake in the Browse LNG
project and the 2013 result was hit by $256 million in
writedowns on some oil and gas fields, flagged in January.
Woodside's underlying profit in 2013 fell to $1.702 billion
from $2.06 billion. Analysts had expected an underlying profit
of $1.85 billion, according to Thomson Reuters I/B/E/S, but some
of those estimates included oil and gas field impairments while
others did not.
The underlying profit was 3-4 percent below forecasts from
UBS and JPMorgan.
The profit decline was due to a 9 percent fall in the
average price it received for its oil and gas, as the mix of
sales was skewed more to gas and costs rose due to production
from the Pluto LNG project in Western Australia.
Woodside reaffirmed it expects to produce 86-93 million
barrels of oil equivalent (mmboe) in 2014, compared with 87
mmboe last year.
Coleman said the company was looking for acquisition
opportunities to boost its volume growth, but said attractive
targets were limited.
"What's out there in the market place - most of the volume
production is pretty fully priced," he said, while adding that
potential targets in North America may be cheap but that was
because production was a long way off.
Woodside's shares slipped 0.7 percent to A$38.25 in a flat
(Reporting by Sonali Paul; Editing by Richard Pullin)