The Woodside Petroleum Limited (ASX: WPL) share price is pushing higher during early afternoon trade. This comes despite the energy producer providing investors with an update on its Scarborough project.
At the time of writing, Woodside shares are fetching for $21.95, up 0.60%. In comparison, the S&P/ASX 200 Index (ASX: XJO) is standing at 7,507 points, up 0.4%.
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What did Woodside announce?
In today's statement, Woodside revealed that it has increased its capital cost estimate by 5% to US$12 billion for its Scarborough project.
The revised amount comprises US$5.7 billion for the offshore component, including modifications to Pluto Train 1 to allow processing of Scarborough gas.
The US$6.3 billion offshore component encompasses an increase in offshore production capacity from 6.5 Mtpa to 8.0 Mtpa of LNG and an additional well.
Woodside's previous cost estimate was last updated in November 2019.
The price increase is a result of a refreshed pricing from major contractors which underpins the updated cost estimate. Woodside noted that this reflects its work with the contractors since last year, maximising the project's value.
Management stated that the expected internal rate of return (IRR) on Scarborough and Pluto LNG plant is more than 12%. The venture has a global competitive cost of supply of approximately $6.8/MMBtu (metric million British thermal units) to north Asia and is anticipated to deliver the first cargo in 2026.
Woodside acting CEO, Meg O'Neill commented:
Significant progress has been made towards our targeted final investment decision on Scarborough and Pluto Train 2 this year.
The cost update includes value-accretive scope changes to deliver an approximately 20% increase in offshore processing capacity and to modify Pluto Train 1 to allow increased Scarborough gas processing. It also reflects the work undertaken with our contractors to optimise the execution schedule and manage costs in preparation for FID.
Woodside's contracting strategy for Scarborough reduces cost risk, with approximately 90% of total project contractor spend structured as lump-sum and fixed rate agreements.
The final investment decision (FID) is being targeted to be completed sometime later this year. Woodside has finalised technical work to be ready for the construction phase following the FID.
Woodside share price summary
The Woodside share price is up around 7% over the last 12 months, but down 3% year-to-date. The company's shares took a dive to $14.93 when COVID-19 put the global economy at a standstill. However, gradually its shares began to rebound.
Based on the current share price, Woodside has a market capitalisation of roughly $21.2 billion.
