Woodside Petroleum Limited
Woodside Petroleum Limited (ASX:WPL) came up with its quarterly results on October 18, 2018 for the period ended on September 30, 2018. Quarterly reports posted 25% rise in the revenue levels well supported by rising output at Wheatstone LNG project and higher oil and LNG prices. Revenue jumped from $923 million to $1.16 billion for the quarter ended on September 30. Company reported production levels of 23.1 million barrels of oil equivalent from 20.3 million barrels during the last year placing the company well on track to achieve the annual production between 87 million barrels to 91 million barrels.
Company has recently signed an agreement with China’s privately owned ENN group. Under this agreement, the two groups will jointly investigate the potential opportunities for LNG marketing, trading and shipping which will help WPL in boosting the demand for LNG. The two groups may further explore opportunities in oil and gas exploration, liquefaction and regasification projects and power generation.
Greater Western Flank project of the company is in Phase. Company is in the process of executing new phase of developments in Senegal and Burrup Hub. WPL is also well on schedule regarding the submission of the SNE field development and exploitation plan and expects to receive the operatorship of the development by fourth quarter.
Lower levels of Debt - The company has considerably reduced its debt consisting of short term and long term debt from US$5.0b to US$4.1b as on September 2018. With debt repayments, debt /equity ratio has significantly reduced the current cash and short term investments stand at US$1.1 b. The company has produced operating cash flow of around US$2.7b resulting in an operating cash to total debt of 66% indicating company has enough cash to pay of its debt. With the current liabilities recorded at US$1.0b, and current assets at US$1.7b, a 1.7x current account ratio indicates that the company is easily managed to meet up its commitments.
Technically after the quarter results were posted, the scrip has faced resistance on the upper side and failed to continue with any further upside move. Scrip turned completely bearish and recorded lower low on the price charts. Price levels at the current juncture are trading near the lower end of the Bollinger bands. Looking at the major indicators such as relative strength indicator, a cross over with the signal line indicates some weakness while moving average convergence and divergence indicator signals entry in negative zone. However, with price levels trading near the lower end of Bollinger bands and with no divergence with Bollinger bands, chances will be there that the price reverses from the lower ends after taking the support levels and bear phase takes a halt.
For the near term, we expect healthy financials posted for the quarter along with new projects in pipeline, reduced debt to equity levels and agreement with ENN will be supporting investment rationale for the future growth of the company. The stock has a market capitalization of $32.11 Bn, price-to-earnings ratio of 21.65x and a beta of 0.6x as of October 25, 2018, exhibiting “hold” scenario at the current juncture when technical and fundamentals parameters are taken in conjunction. We, therefore, maintain our “hold” recommendation on the stock at the current market price of $33.6, in view of the above and prevailing volatility in oil prices.
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