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How Does Woodside Petroleum Look Long-Term?

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Woodside Petroleum (ASX: WPL) is a global energy supplier that is specialised in the upstream petroleum sector. Woodside supplies oil and gas and is the largest natural gas producer in Australia. Woodside’s market capitalisation is A$31.4 billion with a current market price of A$33.8.

woodside-petroleum-wpl-share-price

Key developments from second-quarter report 2019


On the 28 July 2019, Woodside realised their second-quarter 2019 report. Total production in Q1 2019 was 21.7 Million Barrels of Oil Equivalent (MMboe), while total production in Q2 2019 was 17.3 MMboe. This represents around a 20 per cent decrease in overall production between Q1 and Q2 2019. Sales revenue in Q1 2019 was A$1,221 million, while sales revenue in Q2 was A$738 million. This represents around a 31 per cent decrease in total sales revenue between Q1 and Q2 2019.

There are two main reasons for the reduction in production and sales revenue. The first reason is that Woodside’s Pluto liquefied natural gas (LNG) facility underwent significant maintenance that resulted in an overall drop of total production. The second reason is that the price of gas exports fell between quarters, which has decreased overall sales revenue.

Although this has been a disappointing quarterly result for Woodside, this does not impact the future long term growth of the company.

 

What are the long-term prospects that investors should be keeping an eye on?

There are three key projects that should underpin future long term growth of Woodside.

  1. Firstly, the developments of the SNE field located on the west coast of Senegal, Africa. This project is estimated to begin production in 2022, with 100,000 barrels per day production capacity. The final investment decision of this project should take place in the second half of 2019. Woodside has a 35 per cent interest, Cairn Energy Senegal has a 40 per cent interest, FAR has a 15 per cent interest and PETROSEN has a 10 per cent interest.
  2. Secondly, development of the Scarborough gas field located offshore Western Australia. This project is estimated to begin upstream production in 2023 and provide an additional 4 – 5 million tons per annum (MTPA) gas delivered to Pluto LNG. The final investment decision should be made in 2020. Woodside has a 75 per cent interest in the project, while BHP has a 25 per cent interest.
  3. Thirdly, the Browse Basin gas field located offshore Western Australia. This field is Australia’s largest untapped conventional gas resource. It is estimated that there is 13.9 trillion cubic feet (TCF) of dry gas located in this field. The project should deliver 10 million tons of gas to the existing North West Shelf infrastructure per year. Woodside has a 30.60 per cent interest, Shell Australia has 27.0 per cent interest, BP Developments Australia has 17.33 per cent interest, Japan Australia LNG has 14.40 per cent interest and PetroChina International Investment has 10.67 per cent interest.

Should you invest in Woodside Petroleum? 

Woodside could be of interest to investors seeking a long term investment and exposure to the oil and gas industry. Woodside is currently trading on a P/E ratio in the mid-teens and an annual dividend yield of around 6 per cent (fully franked). As with all resource companies, Woodside activities are highly capital intensive, with high levels of investment needed to fund projects. However, Woodside has a future outlook for long term growth over the next decade that is underpinned by the development of a number of significant projects.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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