Woodside (WPL)

By Jason Fittler

Woodside (WPL) is an independent oil and gas company.

The company explores, produces and markets oil and gas.

The major project is the North West Shelf project located in the Carnarvon Basin in WA, other projects include the Pluto project in Karratha WA and interests in various international projects in the Gulf of Mexico, Africa and the Middle East.

Much of Woodside’s infrastructure was constructed many years ago at a fraction of the cost of similar developments today. This gives Woodside a lower cost base than competitors.

WPL sources gas from time tested conventional reservoirs, rather than the fracking techniques used by many competitors, which have drawn environmental criticism.

WPL still has substantial amounts of development ahead of it before full-scale production can commence. There are still many unknowns.

WPL recently acquired a 30% stake an Israeli gas venture called Leviathan, the acquisition adds diversity but also risk given the political uncertainty in the region.

Woodside’s earnings growth has averaged 13.50%p.a. over the last 4 years. In February 2013 WPL reported earnings full year earnings were $2.53 per share for 2012, beating expectations and giving WPL a P/E of 14.68. Analysts forecast earnings to decrease by 2.43% in 2013, before increasing by 16% in 2014. 

WPL has a historical dividend yield of 3.39% (100% franked, gross yield 4.82%), a $1.32 dividend is forecast for 2013, giving a forecast yield of 3.55% (gross yield 5.07%). Woodside paid out approximately 51% of earnings in 2012.

As production ramps up Woodside’s cash flow has increased. Free cash flow amounted to $1.81 per share in 2012. Debt to equity is a very manageable 12.12%.

Given Woodside’s great potential for further growth, the current price assumes a relatively small amount of growth, thus at current prices Woodside has a great upside.

Realization of Lonsec’s $70.00 fair value would represent capital growth of 89%. This is supplemented by a modest yet consistent dividend.

Long-term the energy prices will have a major effect on Woodside’s success. Woodside must also contend with the competing super majors BP and Shell.

WPL represents a good opportunity for investors comfortable with the risks, and looking for capital growth.

For more information on Woodside (WPL) please contact us on 07 4771 4577.