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Gas and oil giants set to rocket?

Woodside Petroleum Limited (ASX: WPL) has today increased its full year production target after delivering a solid lift in production, sales and revenues for the 2nd quarter.

Production for the June quarter of 20.1 million barrels of oil equivalent (mmboe) was 23% higher than last year, while sales rose 13% to 18.6 mmboe, and revenues came in 14% higher at $1.4 billion.

The company also achieved significant milestones during the quarter with the first Liquified Natural Gas (LNG) production coming from the Pluto LNG plant and the first cargo shipped shortly after. Ramp-up of the project was better than expected, with capacity utilisation of 80% achieved versus expected utilisation of 36%.

The company now expects to produce 77 to 83 mmboe in 2012, compared to 64.6 mmboe in 2011. The increase will come primarily from the better than expected performance from Pluto LNG with a smaller increase due to the rescheduling of the planned Vincent oil project shut-down from Q4 2012 into 2013.

The market certainly liked the news, with Woodside jumping 5% in early morning trade, compared to the S&P/ASX 200 Index’s (Index: ^AXJO) (ASX: XJO) rise of 1.1%.

Santos

Woodside’s smaller competitor, Santos Limited (ASX: STO) has kept its full year production target steady at between 51 mmboe and 55 mmboe, despite reporting second quarter production up 9% and sales revenue up 18%, compared to the previous year.

The company produced 13 mmboe in the 2nd quarter, selling 14.9 mmboe and achieving sales revenues of $739m. Quarterly crude oil production of 2.4 million barrels was the highest in four years and 46% above the previous year, primarily due to production from Chim Sào in Vietnam and higher Cooper Basin oil production.

Santos shares were up over 3% in early morning trade.

LNG project cost blowouts

Both Santos and Woodside shares had suffered large price falls recently, due to cost blow outs in setting up their respective LNG projects. Woodside’s Pluto LNG ran about a third over budget and started 16 months late, while Santos recently increased its capex by US$2.5 billion, increasing the cost of its Gladstone LNG project to US$18.5 billion.

Origin Energy (ASX: ORG) has also said that it will also face capex pressures at its US$20 billion Australia Pacific LNG venture.

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Motley Fool writer/analyst Mike King owns shares in Woodside Petroleum. The Motley Fool ‘s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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