Company overview - Woodside Petroleum Ltd (Woodside) is an oil and gas company. The Company is engaged in hydrocarbon exploration, evaluation, development, production and marketing. It operates in three segments: Producing comprising North West Shelf (NWS) Project, Pluto Liquefied Natural Gas (LNG) and Australia Oil; Development comprising Browse floating liquefied natural gas (FLNG) and Wheatstone LNG, and Other. Its Other segment comprises the activities undertaken by trading and shipping, the United States, Exploration, International, Canada and Sunrise Business Units. Its North West Shelf Project is engaged in the exploration, evaluation, development, production and sale of liquefied natural gas, pipeline natural gas, condensate, liquefied petroleum gas and crude oil from the North West Shelf ventures. Its Pluto LNG project is engaged in exploration, evaluation, development, production and sale of liquefied natural gas and condensate in assigned permit areas.
 

WPL Details 
Acquired half of BHP Billiton’s Scarborough area assets in the Carnarvon Basin: Woodside Petroleum Limited (ASX: WPL) has successfully finished the acquisition of half of BHP Billiton’s Scarborough area assets in the Carnarvon Basin, located at offshore Western Australia. WPL bought the assets for US$250 million while making a contingent payment of US$150 million which is payable post a positive final investment decision to develop the Scarborough field. As per the agreement, WPL has acquired a 25% interest in WA-1-R and a 50% interest in WA-61-R, WA-62-R and WA-63-R. WPL would operate WA-61-R, WA-62-R and WA-63-R while ExxonMobil would operate WA-1-R. Moreover, WPL’s Best Estimate Contingent Resources (2C) are now said to be enhanced by 462 MMboe. The Scarborough area assets include the Scarborough, Thebe and Jupiter gas fields, that are estimated to contain gross 8.7 Tcf of dry gas resources at the 2C confidence level.
 
Strong Operational Performance in the Third quarter 2016: WPL reported production records in the third quarter ending September 30, 2016 driven by their solid LNG capacity and reliability. Third quarter witnessed a 20% quarter-on-quarter growth in the revenue. LNG production at Karratha Gas Plant (KGP), was 4% higher than the previous record of the third quarter 2014. There is a record quarterly LNG production at Pluto LNG, which is 1% higher than the previous record of the third quarter 2015. The reliability has exceeded 99% at Pluto and KGP LNG facilities, offshore gas facilities and Nganhurra FPSO (Enfield). Moreover, there was no production interruption of Pluto LNG since January 26, 2016. Additionally, WPL has narrowed the 2016 production guidance to 92–95 MMboe. This is due to the strong operational performance post the increase in production guidance from 86–93 MMboe to 90–95 MMboe in August 2016. Overall, the production in the third quarter 2016 was 13.5% higher than the previous quarter primarily driven by production performance across the operating asset and the recommencement of full production at the NWS facilities after the planned turnaround in the second quarter 2016. In addition, the production at the Okha FPSO (NWS oil) recommenced after the facility turnaround.
 

Third quarter 2016 Operational Performance (Source: Company Reports)
 
Secured funding at competitive rates: WPL got US$1.2 billion in funding at competitive rates as part of managing the debt obligations. WPL will use these funds for general corporate purposes and would further extend the average term to maturity. Moreover, WPL has strong support from the debt capital markets and expects to maintain a gearing within the target range of 10–30%.
 
New short-term pipeline gas supply deal: WPL has agreed a new short-term pipeline gas supply deal with Synergy. This agreement is the first pipeline gas sale by WPL under the new NWS equity lifting arrangements. Moreover, WPL has continued to progress mid-term sales of 12–20 cargoes for the period 2017–2019. The discussions to convert the Pertamina Heads of Agreement to a Sale and Purchase Agreement have been progressing.
 
Julimar Project on schedule and under budget: WPL’s Julimar Project related construction and commissioning work has been completed on schedule and the project is under budget in the preparation for Wheatstone start-up in mid-2017. Moreover, Wheatstone LNG storage tank one is ready for cooldown and all Train 2 modules are on-site. The Wheatstone Project operator is expecting the first LNG from Train 1 in mid-2017 and the first LNG from Train 2 is expected six to eight months later. The Wheatstone is a key component of the company’s near-term growth strategy and would contribute over 13 MMboe of annual production once both trains are fully operational. On the other side, WPL’s Persephone Project has started the reservoir drilling while finished activities ahead of the subsea installation campaign starting in the fourth quarter 2016. The project is on budget and scheduled to start in the second half of 2017.

Julimar Project (Source: Company Reports)
 
Development in Other Projects: The Greater Enfield has entered into the execution phase after a final investment decision in June. For the Greater Western Flank Phase 2 Project, the manufacture and fabrication of key infrastructure, including pipeline and subsea hardware, has continued with the reservoir drilling program scheduled to start in the fourth quarter of 2016. The seismic reprocessing is finished in the Greater Enfield area which would enable the assessment of the potential deeper oil and gas plays. The project is on budget and schedule. Meanwhile, a schedule of activities to increase the viability of the commercial development of the Browse resources is progressing. WPL is targeting completion of concept select in the second half of 2017. Additionally, the Kitimat LNG Joint Venture is reviewing WPL’s NextGen Technology as a potential development concept. The technology has the potential to minimize the environmental footprint related with the project and to optimize the project costs.
 
Assets acquired to leverage deep water capabilities: WPL has completed the transaction to acquire 100% of shares in ConocoPhillips Senegal B.V. The group had signed the agreement for ConocoPhillips’ interests in Senegal, which includes a 35% interest in the 560 MMbbl SNE deep water oil discovery. As mentioned earlier, WPL has also acquired half of BHP Billiton’s interests in the Scarborough, Thebe and Jupiter gas fields, and WPL’s Contingent Resources (2C) have now been enhanced by 462 MMboe.
 
Aggressive Exploration and Appraisal Activities: In Myanmar after the Thalin-1A and Shwe Yee Htun-1 discoveries, WPL has planned a minimum of four wells to be explored in 2017 across Blocks AD-7 and A-6. The processing of the new multi-client 3D seismic data in the Luna Muetse Block in Gabon is expected to be finished in the fourth quarter 2016. In addition, the planning is continuing for drilling of an exploration well in the block in 2017/18. The processing of multi-azimuth, multi-client 3D seismic data in the Doukou Dak Block is also continuing. In addition, the Morocco Joint Venture has submitted an application to the regulator to enter the First Extension Period of the Rabat Deep Offshore Exploration Permits I-VI for drilling of exploration well. The Bréanann 3D seismic survey in FELs 3/14 and 5/14 was finished in Ireland and the processing of data from both the Bréanann and Granuaile (LO 16/14) surveys has been in progress. Moreover, the FEL 5/13 joint venture has applied to enter the second phase of exploration and commit to drill one exploration well. The Ventry prospect is a potential 2018 drill candidate in the license and the current data sets across WPL’s five licenses in the Porcupine Basin shows multiple follow-up opportunities.
 

Permits in Myanmar (Source: Company Reports)
 
2016 Dow Jones Sustainability Index: WPL has achieved the overall score of 80/100 points in the 2016 Dow Jones Sustainability Index (DJSI) that placed WPL in the top five per cent in the oil and gas upstream and integrated sector. The score also means that WPL retained its position as a Sustainability Leader and a member of the DJSI World, Asia Pacific and Australia indexes.
 
Positive trigger from the industry: The oil prices witnessed a favorable environment in the last few months after the news from Saudi Arabia, who trimmed supplies to some Asian buyers. Moreover, the market was expecting more clarity over potential stimulus plans from the US President-elect Donald Trump’s media conference. This led to the dollar fall to one-month lows, also contributing to the commodity price increase. WPL is considered to have good potential in line with the average of its industry group.
 
Stock Performance: WPL stock has risen over 19.18% in the last six months (as of January 17, 2017) and we believe the positive momentum in the stock would continue. Moreover, given the improving sentiment in the Oil and gas industry, WPL’s margins are expected to be better for the coming quarters. The stock is also having a decent dividend yield. WPL recently appointed Mr Larry Archibald as a non-Executive director effective February 2017. From performance standpoint, operational excellence as demonstrated by the group lately seems to add value. Further, the first-mover advantage on the North West Australian coast and proven LNG delivery platform are expected to strengthen WPL’s position. We give a “Buy” recommendation on the stock at the current price of – $ 32.38  

 
WPL Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.