Woodside Petroleum (WPL) Share Trading Update

Submitted by Craig Strzelecki on 22 February, 2007 - 06:42

Woodside Petroleum (WPL) have an upgraded Buy / Medium Risk (1M) share trading recommendation and a price target of $42.80 per share from analyst Citigroup Investment Research (CIR). This comes after minor earnings changes (-6% in ‘08) and an increase in the probability from 60% to 80% that the large Pluto LNG project will be developed. Proven reserves up 33%, to 1,193MMboe, and Proven and Probable reserves up 27%, to 1,580MMboe. Not a surprise, as CIR have flagged for months the potential for significant Pluto reserve migration. Finding costs have been slashed thanks to the apparent maturing of the Pluto LNG project, the 3-year finding cost dropped to US$2/boe and the 3-year 1P & 2P Reserve Replacement Ratio rose 218% and 253%, respectively. However, some operational issues remain, with all these gains were not without some pain, which was felt on the production front with problems at their two new flagship fields – Chinguetti and Enfield. Enfield remediation is set to commence in April. Production guidance lowered: 2007 guidance was reduced from the range 75 to 80MMboe to 72 to 78MMboe, largely due to the sale of the Legendre oil field and project delays at Thylacine (net 51%) and Neptune (net 20%).

Meanwhile, Woodside Petroleum Limited (WPL) have a Buy 1 shares recommendation and a share price target of $43.82 from analyst UBS. The analyst have noted that: NPAT (before significant items) of A$1,395.9m (+37% yoy) was 5% above their forecast, and 3% above consensus. The reported NPAT of A$1427m included an A$31.1m (after tax) gain from the Kipper sale. The final dividend of A77 cps (fully franked) was also A6 cps above their forecast. Overall, this result was slightly better than their expectations. Our '06 EPS has increased 4.5%; '07E EPS has decreased by 1.2%, and '08E EPS has decreased by 16.7%. The change to their '08E EPS forecast is largely a result of updates provided by Woodside on project timing and initial production expectations. Production guidance for 2007 is now 72 – 78 mmboe (prior 75 – 80 mmboe). UBS have commented that proven (P1) reserves have increased by a very respectable 274 mmboe (+33%) to 1.19 bn boe. This has been driven by booking Pluto gas reserves (pre FID for the LNG project). Downgrades at other fields have been mainly oil (Enfield, etc). Their NAV is based on a DCF (10% nominal discount rate) of WPL fcst cash flow over the 2P reserve life of producing assets and all committed and highly probable projects. The analyst's share price target is A$43.82 (prior A$43.89) and is based on their NAV, significant contingent resources and potential exploration upside.

Woodside Petroleum Limited is listed on the Australian Stock Exchange (ASX) under stock code WPL. You can view their investor website here. WPL was listed on the ASX on 18 November, 1971. Don Voelte is the CEO of Woodside (WPL). The principal activity of WPL is the Management and operation of hydrocarbon exploration, development, production, transportation and marketing; implementation and operation of the North West Shelf Gas Project; exploration and development of gas, oil and condensate reserves. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. Check your charts and good luck with your share trading!