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Woodside Petroleum: Scarborough and Pluto Train 2 final investment decision approved

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Woodside Petroleum Ltd (ASX: WPL) is a global energy supplier that is specialised in the petroleum sector. Woodside supplies oil and gas and is the largest LNG producer in Australia. Woodside’s market capitalisation is A$21 billion.

 

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What has Woodside announced?

Woodside’s management announced (22 November 2021) the final investment decision approving the Scarborough and Pluto Train 2 developments, including new domestic gas facilities and modifications to Pluto Train 1. This investment costs US$12 billion (US$6.9 billion Woodside’s total share) and is expected to deliver the first cargo in 2026.

The Scarborough field is located around 375 km off the coast of Western Australia and is estimated to contain 11.1 trillion cubic feet (100%) of dry gas. The development consists of the installation of a floating production unit together with thirteen wells drilled over the life of the project. The gas will be transported to Pluto LNG through a new pipeline of around 430 km. The Scarborough field is particularly attractive to develop because it contains only 0.1% carbon dioxide (which is extremely low relative to other gas projects). Woodside has a 73.5% interest in the Scarborough project while BHP Petroleum has a 26.5% interest.

The Pluto Train 2 will be developed next to the existing Pluto Train 1. Woodside owns 51% of this project, following the sell-down of 49% of Pluto Train 2 that was announced on 15 November 2021. The Pluto Train 1 will also see some improvements to upgrade the facility.

Overall, Woodside’s overall 2P total reserves (total proven and probable reserves) has increased by around 158% to 2,342.0 MMBoe.

Woodside also announced the signed binding share sale agreement for the merger of BHP’s oil and gas portfolio with Woodside (merger). Woodside will acquire the entire share capital of BHP Petroleum in exchange for new Woodside shares.

 

What is the market reaction to Woodside’s announcement?

The market reaction to this announcement has been positive with Woodside’s shares increasing around 4%. Woodside has a dividend yield of around 3.9% (fully franked) and has a P/E ratio of around 19.8x.


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 purposes 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 proceedings. 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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