38 mins ago – 3.15pm
Woodside pre-empt threatens credit ratingAngela Macdonald-Smith
Woodside Petroleum is at risk of having its BBB+ credit rating cut by Standard & Poor’s after deciding to pre-empt Lukoil’s purchase of a stake in its Senegal oil project, with the ratings agency advising it has no capacity to take on more debt for further new investments at the current rating.
The decision last week to pay up to $US400 million ($558 million) to buy the 40 per cent stake in the Sangomar oil project itself “raises its financial risk amid cyclically depressed earnings,” S&P said.
Woodside's Sangomar oil project in Senegal is due to start production in 2023.
To keep the BBB+ rating, Woodside “would need to demonstrate a credible capital management plan to preserve and strengthen its financial profile amid the weak market environment,” it said.
“This would include a sustainable funding strategy for Sangomar and any other growth projects sanctioned over the next 12 months.”
While Woodside has indicated it could consider the sell-down of its increased interest in the project, S&P noted its ability to do that in the short term is likely to be “challenging” in the current market.
S&P said Woodside’s balance sheet strength hinges on its major projects - Scarborough, Pluto train two and Browse - remaining deferred “until 2021 and beyond”.
It forecasts the ration between Woodside's funds from operations and debt will fall to 30-35 per cent this year, and remain slightly above 30 per cent in in 2021.
