MARKETS SPECTATOR: Woodside price point

The lift in Woodside Petroleum Ltd’s share price by $1.20 to $36.40 on April 12 confirmed to many in the market that the decision to cancel its participation in the onshore liquefied natural gas project at James Price Point in Western Australia will herald a share buy-back of as much as $1 billion.

In a Q&A on the ASX’s web site, Woodside chief executive Peter Coleman seemed to confirm a buyback. “Our base business is generating significant cash, which provides options. If our growth opportunities are slower to come to fruition… we will consider additional measures to accelerate the return of capital to investors.”

Citigroup reckons the buyback will be off market and release $10.18 a share of franking credits.

But while Woodside’s interest in James Price Point will probably end, the interest from energy hungry Asia’s is just getting bigger. Last September Woodside sold a 14.7 per cent stake at James Price Point to Japan’s Mitsui & Co and Mitsubishi Corporation who have formed Mimi Browse Ltd for $2 billion. PetroChina paid $1.63 billion to BHP Billiton Ltd last year for the big Australian’s stake.

Woodside still has a 31.3 per cent stake in the project. Estimates of what that stake is worth in the 15.5 trillion cubic feet of gas and 417 million-barrel light crude oil resource may be difficult to accurately ascertain after Woodside on Friday deemed the exploitation of the gas and oil as “not commercial.” But the two energy guzzling Asian economic giants, China and Japan, may try to muscle each other aside by paying top dollar for Woodside’s stake. This may further buoy Woodside’s stock. PetroChina last year said it wanted to invest US$60 billion this decade on global oil and natural gas assets. Woodside may well have plenty of cash to return to shareholders.