Woodside Petroleum: Steady 1Q15 result
About the author:
- Author name:
- By Adrian Prendergast
- Job title:
- Senior Analyst
- Date posted:
- 16 April 2015, 11:12 AM
- Sectors Covered:
- Mining, Energy
Woodside Petroleum (WPL) posted a steady 1Q15 result that lacked any new
major developments or surprises.
It was not a bad result given the
uncertainty gripping the sector. We make no change to our Hold
recommendation or view that WPL is close to fair value on present
fundamentals.
The company remains tight-lipped on any potential
interest in M&A, although we believe this may deliver a better result
than the current focus on Browse and Kitimat.
Result largely in line
Sales volumes on track. 1Q15 sales volumes of 23.9 mmboe were broadly in
line with our forecast of 23.2 mmboe. Production was down 6.8% on the previous
quarter, with Pluto LNG output and WA oil operations marginally impacted by the
cyclone season.
Sales revenue declined 15.9% on the pcp to US$1,408m, albeit
holding up better than we expected with some profit from trading out of Singapore
and the remaining LNG contracts still transitioning during the period to being on
an oil-linked basis. 2Q15 should see another reduced contribution from Pluto with
a planned maintenance shutdown.
Browse and Kitimat not the answer
Robust growth options needed. WPL reported it is progressing pre-FEED
work at the Browse FLNG project and will launch a 7-well appraisal program at
Kitimat in 2Q15 with partner Chevron.
We believe both projects would struggle to
justify development in the current oil price environment and we would prefer
WPL's strategic focus shifted to accommodate the new oil price reality. It remains
our view that WPL is in a strong position to pursue growth from M&A, which could
build out its medium-term growth profile at an opportune point in the cycle.
Model changes
Tweaking short-term output. We have updated our model for the revenue
outperformance in 1Q15 and operational result. This has resulted in an increase in
CY15 NPAT forecast to US$771m (from US$545m), a large impact given the pricing
strength of the first quarter, although a negligible valuation change.
Maintain Hold recommendation
Morgans clients should login to view our revised price target. The key upside risk to
our price target is the potential for WPL to sustain a higher dividend by lifting its
payout ratio above 80%. The key downside risk is further oil price weakness.
More information
Morgans clients can login to view further detailed analysis on Woodside Petroleum. Alternatively, contact your nearest Morgans office for more information.
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