Woodside suffers second cost blowout at Senegal oil site

afr.com:

Woodside Energy has left investors scratching their heads after advising of a cost blowout of up to $890 million and a six-month delay at its large Sangomar oil project off Senegal. It comes only two months since analysts were assured on a site visit that construction was on track.

Shares in the oil and gas producer dipped 1.1 per cent after it blamed the cost increase to between $US4.9 billion ($7.2 billion) and $US5.2 billion on “remedial work” needed for a production vessel being built at a Singaporean shipyard.

The Sangomar floating production and storage facility will require “remedial” work before it leaves the shipyard. 

The estimate is as much as 13 per cent higher than the previous figure, while the start of production is now only anticipated in the middle of 2024, rather than late this year.

The latest revision is the second at the 100,000 barrels-per-day project, which was originally targeted to cost $US4.2 billion when it was given the go-ahead for construction in January 2020.

Citigroup analyst James Byrne said that Woodside seemed to remain uncertain of the extent of the work required or the time it would take, but Tuesday’s update should cover the worst-case scenario. Mr Byrne told clients “everything looked fine at the site trip in May”.

“We are cautiously optimistic that this is the last downgrade,” Mr Byrne said.

Woodside said the broader Sangomar project was 88 per cent complete as of the end of June.

Chief executive Meg O’Neill noted the change in the project schedule had no impact on Woodside’s production guidance for 2023. She described the decision to have the remedial work done on the ship at the shipyard in Singapore as “prudent”.

“This minimises the impact to the project schedule as it is safer,