Financial Markets - Investor Desk

Adding to Woodside’s competitive advantages are the long-term 20-year off-take agreements with the who’s who of Asia’s blue chip energy utilities, such as Tokyo Electric, Kansai Electric, Chubu Electric, and Osaka Gas. These help ensure sufficient project financing during development and should bring stability to Woodside’s cash flows once projects are complete.

Woodside also enjoys first-mover advantages. The NWS/JV has invested more than AUD 27 billion since the 1980s, building infrastructure at a fraction of the cost of today’s developments. With substantial growth aspirations, Woodside still has considerable expenditure ahead of it, but the existing infrastructure footprint is regardless a huge head start, from both an expenditure and a regulatory-approval perspective.

Woodside’s development pipeline is deep, enabling it to leverage the tried and trusted project-delivery platform as a template for other world-class gas accumulations off the north-west coast of Australia. Woodside is well suited to the development challenge. With extensive experience, it remains a stand-out energy investment at the right price.

Woodside Banks Higher Third-Quarter LNG Pricing With More to Come.

Australia’s premier LNG company reported a 2% decline in third-quarter 2021 production to 22 million barrels of oil equivalent, or mmboe.LNG production was impacted by flagged maintenance at the North West Shelf’s Trains 2 and 4, and turnaround activities at Pluto LNG.Despite this, and reduced sales volumes due to inventory build, revenue increased 19% to USD 1.53 billion on higher averaged realised pricing. The average realised third-quarter LNG price increased by 40% to around USD 10.00 per mmBtu, considerably higher than the contract price.

In the fourth quarter, Woodside can expect to see even greater benefit from stronger pricing given the one-quarter oil price lag in its LNG contracts, and the even greater spike in spot LNG prices post the third quarter. Woodside sold six LNG spot cargoes in the third quarter, in the vicinity of 10%-15% and is expecting approximately 17% of LNG to be sold at spot in the fourth quarter. In the third quarter, the LNG spot price doubled to more than USD 20 per mmBtu. But the average for October so far is closer to USD 35 per mmBtu.

Financial Strength

Balance sheet strength remains a key appeal of Woodside. The company’s net debt/EBITDA of just 0.8 affords it the luxury of seriously pursuing growth countercyclically. Woodside’s net debt was USD 2.5 billion at June 2021 for modest 16% leverage. And despite expansionary capital expenditure programs, strong cash flows and a healthy balance sheet should regardless support ongoing dividend payments. Including merger with BHP Petroleum, we project net debt to remain modest at less than USD 3.0 billion.This includes a sustained 80% payout ratio.Expansionary expenditure on the Scarborough/Pluto T2 project, and potentially later on the Browse project, could see first expanded production in 2026. We model Woodside’s share of the combined capital cost after BHP Petroleum merger at circa USD 14.0 billion, driving a 13% increase in equity production to circa 250 mmboe, by 2027, and these are long-life additions.

Bulls Say

Woodside is a beneficiary of continued increase in demand for energy. Behind coal, gas has been the fastest-growing primary energy segment globally. Woodside is favourably located on Asia’s doorstep.
Woodside’s cash flow base is comparatively diversified, with LNG making it less susceptible to the vagaries of pure oil producers. Gas is a primary component of Asian base-load power generation.
Gas has around half the carbon intensity of coal, and it stands to gain market share in the generation segment and elsewhere if carbon taxes are instituted, as some predict.

Company Profile

Incorporated in 1954 and named after the small Victorian town of Woodside, Woodside’s early exploration focus moved from Victoria’s Gippsland Basin to Western Australia’s Carnarvon Basin. First LNG production from the North West Shelf came in 1984. BHP Billiton and Shell each had 40% shareholdings before BHP sold out in 1994 and Shell sold down to 34%. In 2010, Shell further decreased its shareholding to 24%. Woodside has the potential to become the most LNG-leveraged company globally.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.