new thread - future pricing, page-18

Continuing the "Leviathan in doubt" theme, in today's AFR, there was the following article - excerpts follow

"Doubts have intensified around WPL's planned $1.3B stake in Leviathan, with increased speculation the deal may collapse and the company may instead return up to $1B of capital to shareholders.

CBA energy analyst Luke Smith said that if the transaction collapsed, it would free up close to $1B of payments related to the acquisition and could also remove near term capex requirements for the project. We would expect more of this capital originally set aside for Leviathan would make it's way back to shareholders, pending any other major near-term M&A or exploration activity.

The most likely return to shareholders would be through a share buyback - MrHirjee (Deutsche Bank) said, given WPL already raised the dividend payout ratio to 80%."

My thoughts - WPL could go to 2 ways on a buyback - on market or off market. If they have sufficient franking credits, off market would be the way to go, but with a payout ratio of 80% for franked dividends, I do not think they have enough in reserve. My conclusion is that it would be an on market share buyback. At today's share price that would be about 27m shares.

HT1