Woodside Petroleum Limited (ASX: WPL)

Challenges under new budget – Woodside Petroleum edged a bit low on May 24, 2018 as the group aims to take the tax cut discussion heads on with the government to put closure to the prevailing uncertainty. Particularly, the new gas developments’ investments are to be evaluated from investments perspective given the tax cut scenario under the recent federal budget in relation to royalties paid to the State. On the other hand, Woodside’s strategy is underpinned by its ongoing strong base business, world-class asset performance and by execution of committed projects. Its existing business and committed growth are targeted to lift annual production to approximately 100 MMboe in 2020. Last year, the Group outlined a roadmap for growth across three five-year time horizons. The Group has taken actions since then to increase its interest in Scarborough and further raised equity to support its ability to deliver on that plan. Moreover, market conditions are also supporting its strategy as LNG demand growth has been higher than what was expected. It is working towards maximising its value from its existing infrastructure by processing gas from Scarborough through a low-cost expansion of Pluto LNG. The progress which it is making in Horizon 1 will enable it to develop these projects in time for the expected global LNG supply shortfall in the early 2020s.


Near-term Catalysts (Source: Company Reports)

 It has LNG sales opportunities in Asia for its growth projects and the Group is well positioned for an upturn in the market. Its Integrated sales and shipping services are enabling for the value optimisation. The Group delivers strong shareholder distributions and targets to maintain a current pay-out ratio of 80 per cent of NPAT. Recently, it signed MOU for domestic gas supply and entered into a joint venture engagement which proved to be positive. The Group also initiated the negotiations with the contractor for FEED. The Group is planning to increase its capacity from 7 Mtpa to 9 Mtpa. The successful development of the Pluto Project was one highlight and it is pleasing that the Pluto facility will now provide the avenue for development of other gas resources. Its return on equity is in the positive zone (3.4%) as at December 2017. The stock was up by 8.33 per cent in the past six months and rose up by 7.61 per cent in the past one month. We give a “Hold” recommendation at the current market price of $33.59 in view of the positive catalysts while at macro level, OPEC members might ease the production cuts which may impact oil prices.
 

Origin Energy Limited (ASX: ORG)

Transforming customer experience: Origin is the leading Australian integrated energy company with over 4.2 million customer accounts. Recently, Origin entered into an agreement to sell its metering business, Acumen, for $267 million to intelliHUB, (a company to be jointly owned by Pacific Equity Partners and Landis+Gyr). The Group has also committed to a competitive long-term agreement with Acumen for an ongoing deployment and management of digital meters for Origin’s electricity customers. Once the sale is completed, intelliHUB will comprise Acumen and Landis+Gyr’s existing Australian meter service activities. The Group is focussed to deliver its commitment to sell and realise value from Acumen, a business that it has grown from scratch over the past eight years and now has more than 170,000 meters under management.


Customer Activity (Source: Company Reports)

It is one of the competitive long-term metering contracts with Acumen that is enhanced by Landis+Gyr’s global expertise in digital meter technology. Moreover, it will support its digital-first strategy of using data and insights that will enhance the customer experience. The Group will continue to have contract with other parties for deployment and management services for the uncontracted balance of its digital metering requirements. It is expected that the sale will be completed on or prior to 30 June 2018. ORG is now focussing on renewable energy sector and aims to be internationally competitive and expects a cash flow from APLNG to Origin in the range of $360-$370 million. The stock was up by 24.84 per cent in one year and by 6.99 per cent in last three months. We give a “Hold” recommendation at the current market price of $9.75 as the stock is currently trading close to its 52-week high level.

 
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