Investment Thesis:
- Superior free cash flow breakeven price relative to peers have been generated by quality assets (NWS, Pluto, Australia Oil, Browse, Wheatstone)
- Focus on cost reduction and positioning of the business for lower oil price environment
- Earnings improvement through improving oil and gas prices
- WPL well positioned to fulfil increasing LNG demand
- Strong balance sheet position
- Good with free cash flow generation
- Potential exploration success in Myanmar, Senegal, Gabon.
- Change in CEO could either result in some uncertainty around future strategy or it could also be an opportunity to refresh the strategy with a “fresh” set of eyes
Key Risks:
- Imbalance in supply and demand in global oil/gas markets
- Low oil / LNG prices
- Not meeting cost-out targets (e.g. reducing breakeven oil cash price)
- Disruptions in production
Key Highlights:
- WPL reported 31% increase in operating revenue, buoyed by higher realised prices mainly driven by the recovery in demand for LNG and oil
- Underlying NPAT was up +17%
- Board declared an interim dividend of US 30cps (up +15% over pcp), representing a payout ratio of ~80% of underlying NPAT
- Announcement of merger with BHP’s oil and gas business, which is expected to deliver cost synergies north of US$400m p.a. by leveraging combined capabilities and capital efficiency, creating a higher margin oil portfolio
- Improvement in balance sheet with gearing declining -110bps over 2H20 to 23.3%, remaining within target range of 15-35% and free cash flow (FCF) was up +18% to $311m.
- Appointment of Meg O’Neill as the new permanent CEO and managing director
- Revenue generated by WPL segments are; Pluto contributes 47% of the total revenue, NSW contributes 26%, Australia Oil contributes 14% and Wheatstone contributes 13%.
- EBITDA generated by WPL segment are; Pluto contributes 49% of the total EBITDA, NSW contributes 24%, Wheatstone contributes 15% and Australia Oil contributes 12%.
Company Description:
Woodside Petroleum Ltd (WPL) explores for and produces natural gas, liquefied natural gas, crude oil, condensate, naptha and liquid petroleum gas. WPL owns producing assets in the North-West Shelf (NWS) project, Pluto LNG and Australian Oil. WPL is currently developing Browse, Sunrise, Wheatstone, Grassy Point and Kitimat LNG. WPL is currently undertaking exploration activities in Myanmar, Senegal, Morocco, Gabon, Ireland, NZ and Peru.
General Advice Warning
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.