Resources profits boost outlook

Profit announcements from three major international resources companies have underlined the continuing confidence such companies have in Western Australia, adding lustre to the state’s already bright economic future.

In the energy corner, Perth-based Woodside Petroleum Ltd, Australia’s largest publicly traded oil and gas exploration and production company, posted an underlying 2005 net profit of $1.04 billion, up 54.5 per cent on the previous year’s $672 million.

The North West Shelf project operator is hungry for more in its quest to be one of the world’s biggest liquefied natural gas (LNG) producers and has earmarked $2.3 billion dollars for exploration and development this year.

Woodside CEO Don Voelte said LNG markets “are as strong as we’ve seen in a long time. People are looking for volumes in 2008-2012. A stream of buyers continues to come to Perth.”

In the minerals corner are BHP Billiton Ltd, the world’s third largest iron ore producer and the biggest, Rio Tinto, both with huge iron ore operations in the Pilbara.

BHP Billiton delivered a record profit of almost $6 billion for the December 2005 half year, up 48 per cent on the previous December half.

Multi-billion dollar upgrades for its Pilbara iron ore operations form a major part of the almost $20 billion worth of projects in the pipeline.

Rio Tinto tripled the profit from its WA iron ore business last year, underpinning a strong rise in the group’s underlying net profit of $6.5 billion.

Subsidiary Hamersley Iron nearly tripled net earnings to $1.64 billion, and 53 per cent-owned Robe River did the same to $490 million.

All three results were based on rising commodity prices and the shared view that Chinese economic growth was showing no signs of abating, and would last well into the next decade.

Woodside’s slightly lower $1.1 billion profit, down 3.4 per cent on the previous year because of some one-off items and new international accounting practices, came on revenues up nearly 30 per cent to $2.7 billion, all but $28 million of which was from its WA operations.

The company plans to lift production 27 per cent this year to 76 million barrels of oil equivalent.

Other areas of expansion include the huge North West Shelf LNG project near Karratha, development of the $5 billion Pluto project off Onslow, and the $10 billion Browse project off Broome.

On the horizon is the completely appraised and ready to go $9 billion Sunrise gas project in the Timor Sea, on which royalty agreements with Australia are waiting to be ratified by the East Timor Government.

Mr Voelte said he expected oil prices to range between $US50 and $US65 over the next 12 months.

BHP Billiton’s record half year profit was predicated on a near 20 per cent revenue jump to $24.6 billion and earnings before tax up 43 per cent to $9.1 billion.

Like Woodside, the company expects there is much more to come with the Chinese economy growing 10 per cent last year and expected to grow a further 9 per cent this year, easing to 8 per cent for the foreseeable future.

BHP Billiton’s star performer was its carbon steel materials division (iron ore and coking coal), where revenue jumped 130 per cent to more than $3.1 billion, $1.4 billion of that came from its Pilbara iron ore operations.

BHP Billiton has already carried out $3 billion worth of accelerated expansion programs in the Pilbara, including three rapid growth projects, the third of which is expected to come on stream at the end of 2007 to increase production to 130 million tonnes a year in 2007.

The company’s $1.9 billion Rapid Growth Project-4 will push iron ore production up to 152mt/year by 2010, and a fifth such project is under consideration, with the aim of reaching beyond 152mt/year.

Rio also plans to lift its Pilbara production to 200mt/year in 2007. Its completed and committed expansion program currently runs to about $4 billion, without the inclusion of the $1 billion Hope Downs project.