Production at Pluto Liquefied Natural Gas (LNG) plant, Woodside Petroleum Limited's (ASX: WPL) single largest asset, has been put on hold following a near miss with an oil rig over the weekend.
Turmoil from Tropical Cyclone Olwyn, which recently hit the coast of Western Australia, caused a neighbouring oil rig (not owned by Woodside) to break its moorings and drift dangerously close to Woodside's Pluto LNG operations.
Production was halted over fears the oil rig would breach underwater flow lines – however inspections have shown that all flow lines are intact and the Pluto asset is undamaged.
With Pluto expected to contribute 38% of Woodside's total production this year, investors will be wondering if the company's earnings will be affected by the shutdown.
Although Woodside announced that production would recommence once the oil rig was moved away from Pluto, there are no indications on when this might happen.
Presumably it will happen quickly, since Chevron (leasing the oil rig) is reportedly paying US$455,000 a day for the lease and will want to bring it back into action again as soon as possible.
Using Woodside's production targets for 2015 (as in the 2014 annual report) of 84-91 million barrels of oil equivalent (Mmboe), it is possible to estimate how much Woodside will be out of pocket.
Pluto LNG's 38% share of 84-91Mmboe works out to be roughly 32-34Mmboe. Divide the 32Mmboe figure by 365 days in a year, and you get around 0.087Mmboe per day, which works out to ~0.613Mmboe per seven-day week.
By these figures, a low estimate, Woodside is thus losing around 0.7% of its annual production per week.
It's a small amount, especially if Pluto comes back online within the week.
However should it take longer to recommence operations, the bill will accumulate rapidly.
At the moment, it looks as though Woodside should remain on track to meet its previous guidance for production this year.
Despite that the company does not yet appear an outright 'Buy', with its share price remaining stubbornly high even after the fall of oil and LNG prices this year.
While I like Woodside's long-term prospects, I would be waiting for some more pessimism to be baked into its share price before considering a purchase.
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