Company Overview - Woodside Petroleum Ltd (Woodside) is an oil and gas company. The Company is engaged in exploration, development and production of hydrocarbons. The Company operates in five segments: North West Shelf Business Unit, Pluto Business Unit, Australia Oil Business Unit, Browse Business Unit and Others. North West Shelf Business Unit segment develops, produces and sales liquefied natural gas (LNG), pipeline natural gas, condensate, liquefied petroleum gas and crude oil. Pluto Business Unit segment develops, produces and sales liquefied natural gas and condensate in assigned permit areas. Australia Oil Business Unit segment evaluates, develops, produces and sales crude oil in assigned permit areas. Browse Business Unit segment evaluates and develops liquefied natural gas and condensate in assigned permit areas. Other segment consists of activities undertaken by the trading and shipping, United States, exploration, International and Sunrise Business Units.
WPL Dividend Details
Improving volumes drove the third quarter performance:
Woodside Petroleum Limited (ASX: WPL) reported that its production volumes rose by 25.9% to 25.3 mmboe in the third quarter of 2015, as compared to 20.1 mmboe in the second quarter of 2015, driven by better LNG and related condensate volumes at Pluto as well as better oil volumes from Vincent, on the back of a full quarter of production from the Phase IV in-fill well. However, production volumes surged just 0.4%, as compared to 25.2 mmboe in the third quarter of 2014, as oil production contribution from the Balnaves oil asset (which began production for Woodside since April 2015) was offset by decrease in LNG and related condensate production at NWS on the back of a planned LNG Train 5 maintenance turnaround which was finished before the planned schedule during the quarter. Meanwhile, Woodside Petroleum sales revenue improved by 20.9% to $1,086 million during the third quarter of 2015 as compared to $898 million in the second quarter of 2015 driven by increase in LNG and condensate sales volumes coupled with rising oil sales volumes. On the other hand, the sales revenue plunged by 44.6% in the third quarter of 2015 as compared to the third quarter of 2014 impacted by the decrease in realized prices across the portfolio on the back of commodity price pressure that impacted the performance.
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Third quarter of 2015 performance highlights (Source: Company Reports)
Corporate highlights: The group made an agreement to sell its interests in the Laminaria-Corallina Joint Venture in September and the ownership transfer is estimated to happen in second quarter of 2016. As a part of the NWS equity lifting transitional arrangements, the group sold four NWS cargoes directly to its LNG trading customers. On the other hand, Woodside Petroleum made a merger proposal to Oil Search in September, with the proposal that Oil Search shareholders would receive all scrip consideration of 0.25 Woodside shares for every Oil Search share and represent a 31.7% shareholding in the combined entity. WPL has been targeting Oil Search to build a world class portfolio at Papua New Guinea and Australia. But, Oil Search declined Woodside Petroleum Limited merger proposal. However, recently the management made it clear that the $8.3 billion bid for Oil Search is fair and fully priced. Meanwhile, the group implemented an unsecured US$1.0 billion syndicated loan facility in July having 27 domestic and international banks. The syndicated loan facility included two equal tranches having three and five year’s tenors at interest rates of USD LIBOR plus 0.9% and USD LIBOR plus 1.15%, respectively. Woodside is diverting these funds to prepay its US$1.1 billion syndicated loan facility and for general corporate and capital expenditure purposes.
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Deepwater Millennium Drillship used to drill Pyxis-1 well (Source: Company Reports)
Development Progress highlights:
The group executed the Torosa Apportionment Deed of Agreement for Australia Browse FLNG project in July along with the Joint Venture participants - the Commonwealth and Western Australian Governments. The agreement offered the production allocation in future from the Torosa field among the Commonwealth title area (34.6%) and the State title areas (65.4%). As per the Wheatstone LNG Project highlights (which consists of Wheatstone and Iago fields), the project is finished by over 65% and the first gas might start by the second half of the next year. The group’s operated Julimar Project (which has Julimar and Brunello fields) is targeted to start by the second half of 2016. With regards to the Greater Enfield Development highlights, the members approved entry into the FEED phase for the planned Greater Enfield Development which includes the tie-back of the Laverda and Cimatti oil fields via a 31 km flowline to the Ngujima-Yin floating production storage and offloading (FPSO) vessel and is aiming gross (100%) contingent resource (2C) of 70 MMboe (wherein the net Woodside share is over 42 MMboe). The development proposal is aiming an FID during the second half of 2016. The Greater Western Flank Phase 1 Project’s subsea installation as well as the pipeline pre-commissioning activities were finished during the quarter while the drilling and completion activities on the wells are due for finishing from early fourth quarter of 2015. Greater Western Flank Phase 2 Development design and assurance activities are finished to support a planned FID during the second half of 2015. Lambert Deep FEED activities are supporting the planned FID in first half of 2016 with the proposed development being a one-well, subsea tie-back to the existing Angel platform. Meanwhile, Kitimat Joint Venture finished its first development scale appraisal well and would be brought into production to confirm deliverability and ultimate recovery.
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Solid development pipeline ahead (Source: Company Reports)
Exploration Highlights:
In Australia, the group finished the primary resource evaluation for the Pyxis-1 gas discovery, at Production Licence WA-34-L, with which the group added 68 MMboe of net contingent recoverable resources (2C). At Cameroon, Cheetah-1 exploration well was spudded in July reaching a full depth of 4060 m below the rotary table. With regards to Morocco update, the group finished the rabat ultra-Deep 2D seismic acquisition including 1073 km in July. In Myanmar, Woodside is planning for drilling the Shwe Yee Htun-1 (formerly Saung-1) well in Block A-6 by the end of 2015 and planned the Tha Lim-1 well in Block AD-7 during first quarter of 2016. As per the New Zealand highlights, the group is analyzing and interpreting preliminary data from the Vulcan and Toroa 3D seismic surveys. At Republic of Korea, the Hongge-1 well in Block 8 was spudded in September and the results are estimated to be out during Q4 2015.
Woodside Australian Business (source - Company Reports)
Conservative Outlook:
Woodside Petroleum has revised its production target range for the full year of 2015 to the range of 88 to 93 MMboe as compared to its earlier production range of 86 to 94 MMboe. The production targets also comprise Balnaves oil as well as Canadian pipeline natural gas production. Woodside narrowed the production range driven by many factors like over 1.0 MMboe contribution on the back of solid Pluto performance (which even comprises completion of the major turnaround ten days ahead of schedule); around 1.3 MMboe contribution driven by the enhanced performance range from the Vincent Phase IV in-fill well which was drilled this year along with improved facility performance. On the other hand, the production would also include over 1.25 MMboe reduction for Canadian pipeline gas which was not produced owing to the delayed completion of two Liard wells.
Woodside Global Business (Source - Company Reports)
Stock Performance:
The shares of Woodside Petroleum have been under pressure this year and corrected over 22.9% in this year to date impacted by the oil and LNG prices pressure. In fact, the stock plunged over 8.18% in the last four weeks (as of November 10, 2015) partly impacted by the Oil search’s rejection of Woodside Petroleum merger proposal coupled with sales decline due to falling average realized prices despite volumes rise. We believe that the recent correction has placed the stock at an attractive valuation levels, with WPL trading at a cheaper P/E of 9.1x, as compared to its peers. Investors should also note that Woodside Petroleum also has a strong dividend yield of 9.4%. Based on the foregoing, we reiterate our BUY recommendation on Woodside Petroleum stock at the current price of $29.34
WPL Daily Chart (Source: Thomson Reuters)
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