Ann: Update on the Pluto LNG Project , page-6

Article in todays paper.

http://www.theaustralian.com.au/business/news/woodside-warned-over-debt-levels/story-e6frg906-1225801820658

Woodside warned over debt levels

by Matt Chambers From: The Australian, Dow Jones Newswires November 23, 2009 12:00AM

WOODSIDE Petroleum has been warned to raise equity rather than debt to fund a potential billion-dollar cost blowout at its Pluto liquefied natural gas project, or risk a credit rating downgrade.

After Woodside's revelation on Friday that development costs at Pluto could jump to $13.1 billion, ratings agency Standard & Poor's said it was considering downgrading the Perth company's rating a notch, while Moody's changed the outlook from stable to negative.

Woodside chief executive Don Voelte told reporters in Perth on Friday that the company might need to borrow to fund the blowout, saying "we just don't look at the capital markets as a necessity at this point".

S&P said it would not look favourably on Woodside taking on more debt.

"Concerns regarding the degree to which Woodside's credit metrics had already been stretched by the significant increase in debt to fund Pluto . . . were already factored into our negative outlook on the company," S&P analyst May Zhong said.



It is understood S&P wants Woodside to raise equity capital.

S&P will wait to see how Woodside funds the blowout, but taking on more debt is likely to result in the company's A-minus rating being dropped to BBB-plus with a negative outlook.

Mr Voelte will face the investment community in Perth tomorrow at the company's annual investor briefing.

Pluto, which is being built on the Burrup Peninsula in Western Australia's Pilbara region, faced cost overruns of between $672 million and $1.12bn due to "lower than budgeted productivity", Woodside said.

Moody's senior vice-president, Terry Fanous, said the cost blowout would put pressure on Woodside's financial profile and constrain the company's rating.

"Woodside's credit profile has a limited cushion within the Baa1 rating given the large capex associated with Pluto and the company's weak financial profile relative to what is appropriate for the rating."

Equities analysts are less concerned about the blowout.

Credit Suisse analyst Andrew Williams said the impact on Pluto's net present value was minimal and while the blowout was negative at the margin, it was within a reasonable range, given the size, scope and timing of the project.

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WPL shareholders may want to keep some spare cash ready !!!!

HT1