Woodside Petroleum Limited

 

WPL Details
 
Sales Revenue Up 58% in Q3 2019:Woodside Petroleum Limited (ASX: WPL) is involved in the exploration, development, operation and management of hydrocarbon. On 24^th December 2019, the company announced that Woodside Energy Trading Singapore Pte Ltd inked a long-term sale and purchase deal with Uniper Global Commodities SE. As per the deal, the company will supply LNG from its global portfolio for a term period of 13 years, staring in 2021. 
 
Key Takeaways from Third Quarter Ended 30 September 2019: During the quarter, the company’s sales revenue increased 58% sequentially and came in at $1,164 million. The increase was due to a 44% rise in production and better-than-expected realised LNG pricing. The company delivered production of 24.9 mmboe and achieved 99.7% reliability at Pluto LNG during the quarter.
 

Q3 Production Highlights (Source: Company Reports)
 
Outlook:For 2019, the company predicts total depreciation and amortisation to be in the band of $1,650 million – $1,800 million. The company stated that its major projects are progressing well towards important decision points. The company expects Pluto LNG and the Greater Enfield Project to be the major contributors to achieve a production goal of roughly 100 MMboe in 2020. Further, the company is aiming production to witness a CAGR of more than 6% for the period covering 2019-2028.
 
Valuation Methodology:Price to Cash Flow Multiple Approach
 

Price to Cash Flow Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock gained 13.52% in the past 3 months. Currently, the stock is trading above the average of its 52-week high and low of $37.70 and $30.580, respectively.  As on 07 January 2020, the company’s market capitalisation stands at ~$33.32 billion, with 942.29 million outstanding shares. Its EBITDA margin for 1HFY19 stood at 62.7%, better than the industry median of 36.2%.Its quick ratio and current ratio for 1HFY19 stood at 3.31x and 3.45x, better than the industry median of 0.82x and 1.17x, respectively, which implies a better liquidity position of the company. Considering the performance in Q3 2019, decent outlook and margins, we have valued the stock using P/CF based relative valuation method and for the purpose, have taken the peer group - Senex Energy Ltd (ASX: SXY), Origin Energy Ltd (ASX: ORG) and Worley Ltd (ASX: WOR). Therefore, we have arrived at a target price with an upside of higher single-digit (in % terms). Hence, we give a “Hold” recommendation on the stock at the current market price of $35.630 per share, up 0.764% as on 07 January 2020.
 
 
WPL Daily Technical Chart (Source: Thomson Reuters)
 
 

Liquefied Natural Gas Limited

 

LNG Details
 
Approval Received for Amendments to the PDP7 Plan: Liquefied Natural Gas Limited (ASX: LNG) is engaged in the business of natural gas and offers reliable, secure, and adaptable mid-scale natural gas liquefaction solutions, thereby decreasing hazardous environmental impact. On 27 December 2019, the company expressed its appreciation for the recent nod by Prime Minister, relating to amendments to Vietnam’s Power Development Plan 7 (PDP7). The company also stated that the approval to the amendments were a prerequisite for executing its binding sales and purchase agreement with Delta Offshore Energy Pte Ltd, for delivery of 2 million tonnes of U.S. LNG from Magnolia LNG per annum.
 
Financial Highlights for the Year Ended 30 June 2019: The company reported revenues for FY19 of $0.671 million, up from $0.326 million reported in the previous financial year.Net loss for FY19 stood at $33.5 million, up from a net loss of $22.8 million in FY18.
 

FY19 Financial Highlights (Source: Company Reports)
 
September Quarter 2019 Highlights: During the quarter, net operating cash outflow came in at $6.8 million as compared to operating cash outflow of $6.7 million reported in the June quarter. At the end of the quarter, total cash balance stood at $14.9 million, down from $22.1 million at the end of the previous quarter. The company predicts total cash outflows for December quarter to be roughly at $6.03 million, after making major adjustments for staff costs of ~$2.63 million & administration and corporate costs of ~$2.12 million, respectively. LNG project development costs for the coming quarter is predicted to be roughly at $1.02 million.
 
Stock Recommendation: As per ASX, the stock gained ~5.3% in the past five days. The stock is trading below the average of its 52-week low and high of $0.145 and $0.60, respectively. As on 07 January 2020, the company’s market capitalisation stands at ~$115.32 million, with 576.61 million outstanding shares.Its current ratio for FY19 stood at 6.37x, better than the industry median of 1.21x, which implies a good liquidity position in relation to peers. Additionally, it has a nil debt to equity multiple as compared to the industry median of 0.24x. The company as a part of its strategy seeks to capitalize on the development and operation of greenfield LNG sites. On the valuation front, the stock is trading at a price to book multiple of 3.7x as compared to the industry average of 9.9x on TTM (Trailing Twelve Months) basis. Considering the aforesaid factors, we recommend a “Speculative Buy” rating on the stock at the closing price of $0.200 per share as on 07 January 2020.

 
 LNG Daily Technical Chart (Source: Thomson Reuters)

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