Acquisitions in the energy industry will depend on at least a few more months of weakness in oil prices, according to Australia’s Woodside Petroleum Ltd.
Few companies have the cash to attempt purchases after the slide in crude prices, while sellers aren’t yet willing to offload their best assets, Chief Executive Officer Peter Coleman told analysts Wednesday on a conference call.
“We’ve got another quarter in front of us before we really start to see a significant number of asset sales coming into the market,” Coleman said after Woodside posted a 39 percent drop in first-half profit. “It’s really difficult to sell an asset today, and it’s equally difficult to buy one.”
Royal Dutch Shell’s Plc’s $70 billion deal earlier this year to buy BG Group Plc was seen as the start of an M&A wave in the energy industry as oil prices fell. Crude prices that have dropped by about half over the past year have forced oil and gas producers to slash costs.
Even after its $2.75 billion agreement in December to purchase stakes in Apache Corp. assets, Woodside has a strong balance sheet that may allow the company to make another acquisition and take advantage of low crude prices, according to a February report from Goldman Sachs Group Inc.
Although Woodside has fared better than peers in the downturn, the company told investors in May that it’s targeting A$680 million ($499 million) of cost savings by next year and had let about 600 people go since the start of 2014.
Tough Markets
Woodside’s net income fell to $679 million from $1.1 billion a year earlier, the Perth-based oil producer said Wednesday in a statement. That was better than the $649 million median estimate of four analysts surveyed by Bloomberg News.
Woodside also faces a fall in liquefied natural gas prices in Asia as new supply combines with weakened demand in key markets such as Japan, Korea and China. The operator of the Pluto and North West Shelf LNG projects in Australia said in July it aimed to make a decision on whether to go ahead with its Browse LNG project in the second half of 2016.
LNG prices are expected to be little changed over the next 18 months, Coleman said. “We think it’s a short- to medium-term issue that will get worked through.”
