BHP Group Limited

BHP Details

A Look At The Recent Updates: BHP Group Limited (ASX: BHP) has an engagement in the exploration, development and production of oil and gas. It is also involved in the mining of copper, silver, lead, zinc, molybdenum, uranium, gold, iron ore, metallurgical coal and energy coal. The company recently announced a change in its director’s interest where Ian Cockerill acquired 3,500 ordinary shares in BHP Group Plc at GBP 19.25 per share, taking the final holdings to 5,259 shares in BHP Group Limited and 3,500 shares in BHP Group Plc, effective from June 13, 2019.

In a previous update, the company released a presentation on the management of tailings storage facilities. Among its portfolio, the company has 67 operated tailings facilities across all sites.The company is in the process of establishing a dedicated task force to have an enhanced focus on internal dam management and is progressing towards new technologies to mitigate risks.

March’19 Quarter Key Highlights: March YTD-19 production of petroleum was 92 MMboereporting no change on the pcp owing to lower seasonal gas sales. Production of Copper totalled to 1,245 kt, reporting 3% decrease on pcp.
Production of iron ore, Metallurgical coal and Energy coal also remained unchanged at 175 mt, 31 mt and 20 mt, respectively. 


March’19 Quarter Operational Performance (Source: Company Reports)

Key Developments: The March 2019 quarter was characterised by major developments including approval of US$696 million in capital expenditure for Atlantis Phase 3 project in the US Gulf of Mexico. Other than the above, five projects in petroleum, copper, iron ore, and potash with a total budget of US$11.1 billion were under development by the end of March 2019.

What to expect: In the operational update for nine months ended 31 March 2019, the company stated that the production guidance for FY19 remains unchanged for energy coal, metallurgical coal, petroleum and copper. The guidance for iron ore is decreased to between 265 and 270 Mt due to the impact of Tropical Cyclone Veronica. Unit costs for New South Wales Energy Coal are expected to be approx. US$ 51 per tonne and that for Western Australia Iron Ore are expected to be less than US$15 per tonne.

Stock Recommendation: The stock’s EBITDA margin and net margin for H1FY19 stood at 49.3% and 21.4%, which are better than the industry median of 33.4%, and 12.5% respectively, implying decent fundamentals. Its current ratio for H1FY19 stood at 2.55x, which is better than the industry median of 1.88x, which implies the company is in a better position to address its short-term obligations.

Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $41.850 per share (down 0.547% on July 4, 2019).


BHP Daily Chart (Source: Thomson Reuters)
 

Woodside Petroleum Ltd

WPL Details

Upcoming Projects Expected To Deliver Decent Value To Shareholders: Woodside Petroleum Ltd (ASX: WPL) has an engagement in hydrocarbon exploration, evaluation, development, production and marketing. The company recently announced a change in its director’s interest where Peter John COLEMAN disposed 30,000 shares on June 27, 2019, at the consideration of $37.09 per share, taking the final holding to 214,973 ordinary shares held by Pacific Custodians Pty Ltd as trustee under Mr Coleman’s executive employment agreement and 441,119 ordinary shares held by Pacific Custodians Pty Ltd as trustee under the managed shares facility.

WPL had also announced that it has successfully completed additional work at Pluto LNG and has restarted LNG production.In another update, WPL published investor site visit 2019 presentation where it highlighted about its upcoming milestones. It will be executing Scarborough gas tolling agreement along with the completion of Scarborough FEED (front-end engineering design) and Pluto LNG Train 2 FEED. In the NWS project (North West Shelf), it will execute the gas processing agreement and commence front-end engineering design activity process. WPL will be targeting ~100 MMboe annual production in 2020.

March’19 Quarter Performance Highlights: Sales revenue for the period was reported at $1,221 Mn, with the production of 21.7 MMboe. The company commenced domestic gas production from Wheatstone LNG. During the period, WPL also secured additional debt funding through the issue of a ten-year $1,500 Mn bond on the US Rule 144A/Regulation S market.


Q1FY19 Sales Revenue Metrics (Source: Company Reports)

What to expect: The company was awarded Front End Engineering Design (FEED) contract for the SNE Field Development Phase 1 FPSO facility. Its also signed a ‘heads of agreement’ with ENN Group for the sale of 1.0 Mtpa of LNG for a period of ten years, commencing in 2025.

Its Greater Western Flank Phase 3 (GWF3) project entered the concept definition phase in January 2019.It is expected to target the recovery of 435 Bcf of gas via four subsea wells tied back to existing North West Shelf Project infrastructure, with ready for start-up (RFSU) targeted for 2022.

Stock Recommendation:WPL’s gross margin, EBITDA margin and net margin for FY18 stood at 50.3%, 71.0% and 28%, which are better than the industry median of 49.7%, 38.3% and 14.9%, respectively, implying decent fundamentals. Its current ratio for FY 2018 stood at 2.31x, which is better than the industry median of 1.28x, which implies the company is in a better position to address its short-term obligations.

Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $35.780 per share (down 0.223% on July 4, 2019).


 WPL Daily Chart (Source: Thomson Reuters)

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