Industry Trend Analysis - Financial Discipline, Efficiency To Shape Firms' Strategies - DEC 2017

BMI View : Greater capital discipline, cost cuts and improving efficiency will continue to shape the long-term strategies of the Australian upstream companies, despite the modest recovery in global oil prices. Investment in greenfield projects will take a back seat, as firms prioritise output maintenance and developing existing assets .

After a challenging FY 2016, we expect the performances of the five ASX-listed upstream firms, Santos, Woodside Petroleum, Origin Energy, OilSearch and Beach Energy, to improve over the coming years, supported by a gradual rebound in global oil and gas prices, and continued focus on cost cuts and efficiency improvements.

Both Santos and Beach Energy returned to growth in FY 2017, posting net incomes of USD0.3bn and USD0.1bn, respectively, after booking combined losses of USD1.4bn in FY 2016. Woodside and OilSearch's earnings also improved, with combined net income growing from USD1.0bn in FY 2016 to USD1.3bn in FY 2017. Origin Energy plunged deeper into the red, registering a loss of USD1.7bn in the financial year, though this was due to a large impairment charge against its stake in the Australia-Pacific (AP) LNG project.

Net Incomes Poised To Strengthen
Selected Companies - Net Income Available To Common Shareholders, USDbn
Source: Company Data, BMI

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