The Distillery: Woodside downside?

Jotters scrutinise the gulf between the outlooks of Woodside’s chief and its shareholders, while seeing brighter days at Suncorp.

Woodside Petroleum chief executive Peter Coleman has handed down a set of results that has left the register a little nervous. Australia’s business commentators report this morning on the gulf between the assessment from Coleman and the attitudes of shareholders, as well as the more cautious approach that the Woodside boss is taking.

The Australian Financial Review’s Matthew Stevens notes Coleman’s assessment of Woodside’s first half of maturing operations and income that are helping reduce debt and increasing wealth for shareholders is far from universally shared.

“On the other hand, the market’s view of Woodside’s rosy, option-loaded horizon seems to have been blotted out by matters far more short term. Sure, the half was notable for record production and revenue numbers. But that is what happens when you invest $15 billion on a new 4.3mtpa LNG plant like Pluto. What concerned the market was that the first-half profit numbers looked a tad soft as a result of production interruptions and scant material change in overall oil volumes. There is also very little reason to anticipate surprises on the upside over the second half given the slightly reduced full-year production outlook that accompanied the profit announcement.”

Business Spectator’s Stephen Bartholomeusz says Coleman’s more measured approach to Woodside’s operations contrasts enormously with the approach of his predecessor, Don Voelte. But he adds the two were both appropriate men for their times.

“Voelte’s dash for growth, while not without its issues – the Pluto project now powering Woodside’s cash flows was well over budget and time – came in that initial phase of the LNG dimension to the broader resources boom. Coleman’s more conservative style was imposed before Woodside could get too caught up in the massive cost escalations that have afflicted the resources sector generally and the LNG sector in particular as they competed for the resources needed to build their projects. The de-risking of Woodside’s exposure to the Browse project through the $US2 billion sell-down of its interests to Mitsui and Mitsubishi was a case in point, as was the decision to resist the pressure from the WA government and walk away from the controversial $US45 billion-plus proposed onshore LNG facility for Browse at James Price Point. That decision was further validated by this week’s West Australian Supreme Court finding that the environmental approvals for the proposed gas processing hub were unlawful.”

The Herald Sun’s Terry McCrann notes the significance of Woodside’s lack of commitment so far to the Browse project.

“All Woodside has done is commit to using the innovative floating platform technology. What was understated but was very clear, is that Browse can only go ahead using that technology: No floating platforms, no Browse. But the actual decision to press the green light will only finally be made in 2015. Although yesterday was similar to BHP Billiton's approach to its big potash project. Both Browse and BHPB's Jansen project have been given orange-green lights.”

Fairfax’s Malcolm Maiden says unlike a long list of chief executives that have falsely talked up a ‘big turning point’ for their company, Suncorp’s boss Patrick Snowball actually has a sporting chance of being correct.

“In June he announced that he had sold a $1.6 billion debt portfolio in Suncorp Bank to Goldman Sachs at a price of 60¢ in the dollar. The bank posted a post-tax loss of $632 million in the year to June after importing the book loss on that transaction, and Suncorp's bottom line-profit fell by 32 per cent to $491 million. The loss in the banking business flows from a genuinely transformational deal, however, and the better guide to the group's performance and capacity to reward shareholders is its 19.3 per cent rise in core earnings to $1.2 billion.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd says shareholders are pretty happy about the latest dividends from Suncorp worth almost a combined $1 billion for the year.

“Fund managers are hopeful that 2014 will be the third year in a row that Suncorp distributes excess capital through a special dividend. The company still has $840 million in surplus capital. The company has issued a target of achieving return on total equity of 10 per cent by 2015. That is relatively low, considering it only just beats the cost of capital. But it has to be remembered that Suncorp is carrying about $600 million in goodwill from its acquisition of GIO Insurance and Promina.”

In other corporate news, Fairfax’s Elizabeth Knight looks at the reaction to Newcrest Mining’s run-in with the corporate regulator that’s already becoming apparent at some of Australia’s top companies.

“In the week before announcing its results, BHP Billiton normally sends out an update of where the analysts' consensus is sitting. But this year, BHP departed from the procedure. It is the Newcrest hangover.”

The Australian’s Asia Pacific editor Rowan Callick looks at the changing face of Chinese shopping thanks in large part to businesses like business-to-business and business-to-consumer players like Alibaba.

And finally, The Australian’s John Durie gives his running summation of earnings season, while The Australian’s economics editor David Uren laments the state of the debate between the two parties about anti-dumping laws.

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