WOODSIDE PETROLEUM (WPL)
A fresh set of eyes on Woodside Petroleum's vast LNG asset base has given the market cause to pause over this stock. New chief executive Peter Coleman has been rethinking the approach to the company's future projects in an apparently more leisurely fashion but don't mistake this for a change in value of the business.
It's a bit like Peter Brock cruising around Mount Panorama with his arm resting outside the window giving the impression he was out for a Sunday drive. Not so. "Peter Perfect" was always looking at the finish line and what he needed to do to get his charge across it as quickly as possible.
Coleman has adjusted the Pluto Train 1 LNG start-up to March next year and is reconsidering the model for Pluto's expansion, including a later starting date than previously thought.
The final investment decision on the Browse LNG project will now be made about mid-2012 but even that date could slip depending on how the company decides it can extract the best value from the potential $US35 billion ($36.14 billion) project.
Attempts to repair the relationship with the East Timor government have begun as the joint venture with Shell to develop the $US11 billion Sunrise LNG project works towards a final decision next year.
The long-established North West Shelf LNG project, of which Woodside operates and owns 16.67 per cent, is the benchmark for Australian projects and remains the cornerstone of Woodside's portfolio.
Price
Even with a more cautious approach to these new projects, Woodside remains the best way to gain exposure to Australia's rapid rise as a global LNG producer and the strong demand for the product from Asia. If all of Woodside's projects go ahead as proposed, the company will be producing about 21 million tonnes of LNG every year by 2020. Changing drivers in this premium vehicle does not alter the value on offer in Woodside.
In effect, investors are getting the existing projects at a discount and paying virtually nothing for the considerable future upside of Pluto, Browse and Sunrise. Whichever course Coleman chooses for Woodside's future, investors can buy this stock at the current pit-stop price of about $33 a share knowing its top speed is more like $50 coming down Conrod Straight.
Greg Fraser is an analyst at Fat Prophets.
Frequently Asked Questions about this Article…
What recent leadership changes at Woodside Petroleum should everyday investors know about?
Woodside Petroleum has a new chief executive, Peter Coleman, who is rethinking the company’s approach to future LNG projects. The article says Coleman is taking a more measured, ‘leisurely’ approach to planning, but that this does not necessarily change the underlying value of Woodside’s business.
How has Peter Coleman adjusted the timeline for the Pluto Train 1 start and Pluto expansion?
Coleman has pushed the Pluto Train 1 start to March next year and is reconsidering the model for the Pluto expansion, including a later starting date than previously expected, according to the article.
What is the current status and timing for the Browse LNG project?
The final investment decision on the Browse LNG project is expected around mid-2012, but that timing could slip depending on how Woodside decides to capture the best value from the potential US$35 billion project.
What’s happening with the Sunrise LNG project and Woodside’s relationship with East Timor?
Woodside and partner Shell are working toward a final investment decision on the US$11 billion Sunrise LNG project next year, while attempts to repair the relationship with the East Timor government are underway as the joint venture progresses.
Why is the North West Shelf project important to Woodside Petroleum investors?
The long-established North West Shelf LNG project is considered the benchmark for Australian LNG developments. Woodside operates the project and owns a 16.67% stake, and the article describes it as the cornerstone of Woodside’s portfolio.
What is the investment case for buying Woodside Petroleum shares right now?
The article argues Woodside is a primary way to gain exposure to Australia’s rise as a global LNG producer and Asia’s strong demand for LNG. It suggests investors are getting existing projects at a discount while paying little for potential upside from Pluto, Browse and Sunrise, with the stock trading at about $33 a share and implied upside noted in the piece.
How much LNG could Woodside produce if all planned projects go ahead?
If all of Woodside’s proposed projects proceed as outlined, the company could be producing about 21 million tonnes of LNG per year by 2020, according to the article.
Who provided the analysis and commentary on Woodside Petroleum in the article?
The commentary in the article is from Greg Fraser, an analyst at Fat Prophets, who discusses the project timelines, valuation implications and investment outlook for Woodside Petroleum.
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