By David Winning

SYDNEY--Woodside Energy is excited by the potential to expand its Sangomar oil project in Senegal, but any decision would be informed by performance data from the field that only started production earlier this year, said Chief Executive Meg O'Neill in an interview.

The Sangomar field was a standout performer in Woodside's fiscal third quarter, achieving nameplate capacity with gross production rates of 100,000 barrels of oil in July, just a month after it came online. The Australian company drilled the last of 24 development wells in the three months through September.

Sangomar comprises two different oil-bearing reservoirs lying below the Earth's crust at water depths of some 800 meters. The first phase of development mainly involves pumping crude oil from the deepest reservoir, known as S500, to a vessel with storage capacity on the surface of the ocean.

O'Neill said there are significant amounts of oil in place that could be accessed in the other reservoir, called S400, but management first needs to see how easily oil is flowing. Woodside's gas-injection system at Sangomar is now operational, with a water-injection system in commissioning.

"One question for Sangomar has been the dynamic performance, how well connected the reservoir would be," said O'Neill. "It's early days and we continue to monitor it closely."

An expansion of Sangomar is another growth option for Woodside at a time when it is aggressively reshaping its portfolio of energy projects through developing new production hubs and adding opportunities via acquisitions. Woodside said on Wednesday that its Scarborough natural gas project in Australia is 73% complete and on track for its first cargo of liquefied natural gas in 2026.

Woodside completed the $900 million takeover of U.S.-listed Tellurian and its flagship Driftwood LNG asset on the U.S. Gulf Coast, which has been renamed Woodside Louisiana LNG, this month. Roughly two weeks earlier, Woodside wrapped up the $2.35 billion acquisition of an ammonia project in Beaumont, Texas.

Still, some analysts worry Woodside is biting off more than it can chew and is putting its dividend at risk. Woodside in recent periods has paid out 80% of earnings as dividends despite the step change in capital expenditure commitments.

In a note this month, research analysts at Macquarie said they think Woodside's acquisitions of Tellurian and the ammonia project effectively extend its capital-expenditure cycle to 2030. It has forecast a cut to Woodside's dividend payout ratio to 60% so that gearing stays in check.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

October 15, 2024 21:45 ET (01:45 GMT)

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