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
 
Strong Operational Performance in the third quarter 2016:Woodside Petroleum Limited (ASX: WPL) reported a number of production records in the third quarter ending 30^th September 2016. This strong production performance is on the back of solid LNG capacity and reliability, which contributed a twenty per cent quarter-on-quarter growth in the revenue. In the third quarter 2016, LNG production at Karratha Gas Plant (KGP) was a record performance, which generated a 4% increase as compared to the previous record of the third quarter 2014. Quarterly LNG production at Pluto LNG, was 1% higher than the previous record of the third quarter 2015. The reliability has exceeded 99% at Pluto and KGP LNG facilities, as well as for offshore gas facilities and Nganhurra FPSO (Enfield). Moreover, there was no production interruption of Pluto LNG since 26^th January 2016. On the other hand, WPL has narrowed the 2016 production guidance to 92–95 MMboe. This is due to the strong operational performance and after 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 due to the excellent production performance across the group’s operating asset and the resumption of full production at the NWS facilities after the planned turnaround in the second quarter 2016 leading to a rise in capacity. In addition, the production at the Okha FPSO (NWS oil) restarted after the facility turnaround.
 

Third quarter 2016 Operational Performance (Source: Company Reports)
 
Boosting capital position:WPL has secured US$1.2 billion in funding at competitive rates as part of managing the debt obligations. These funds comprise USD800 million US 144A ten-year corporate bond with a coupon of 3.70% and a USD200 million six-year private placement under their Global Medium Term Notes (GMTN) program. WPL intends to use these funds for general corporate purposes and would further extend the average term to maturity. Moreover, WPL has a strong support from the debt capital markets and gearing is also 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 are ongoing to convert the Pertamina Heads of Agreement to a Sale and Purchase Agreement.
 
Project’s developments are on track:WPL’s Julimar Project completed all the construction and commissioning work on schedule and 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 will contribute over 13 MMboe of annual production once both trains are fully operational. As per the group’s Persephone Project, the reservoir drilling has started as well as finished activities ahead of the subsea installation campaign starting in the fourth quarter 2016. The project is on track with the budget and scheduled to start in the second half of 2017.
 
Execution phase started for Greater Enfield project: The Greater Enfield has entered into the execution phase after a final investment decision in June. The major contracts are awarded for subsea engineering, procurement, construction and installation, FPSO facility modifications, drill rig and subsea hardware. Moreover, 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 from fourth quarter 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 associated with the project and to optimize the project costs.
 
Assets acquired to leverage deep water capabilities: WPL has signed the agreement to acquire ConocoPhillips’ interests in Senegal, which includes a 35% interest in the 560 MMbbl SNE deep water oil discovery. Moreover, WPL has also agreed to acquire half of BHP Billiton’s interests in the Scarborough, Thebe and Jupiter gas fields, which upon the completion is expected to increase WPL’s Contingent Resources (2C) by 462 MMboe. Woodside’s total 2C assets would enhance by 10% post the deal. The group is paying US$250 million to BHP Billiton post finishing the transaction and a contingent payment of US$150 million after a positive final investment decision to develop the Scarborough field.
 

Scarborough, Thebe and Jupiter gas fields (Source: Company Reports)
 
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 an 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 is 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.
 
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.
 

1H 2016 Performance (Source: Company Reports)
 
Stock Performance: The shares of WPL have risen over 6.6% in the last four weeks (as of October 25, 2016) as the group came up with strong third quarter of 2016 results. Moreover, OPEC countries are also trying to control the oversupply in the oil markets and even Russia intends to extend their support. Any possible deal on this front could further drive the oil prices and consequently the WPL stock price. The group is a clear long term player as it makes constant efforts of building its assets base coupled while the project developments always on track indicating operational efficiency. We reiterate our “Buy” recommendation on the stock at the current price of $28.37
 

WPL Daily Chart (Source: Thomson Reuters)

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