Woodside Petroleum Limited (WPL)
Scarborough Purchase Sensible and Higher
Oil Lifts Earnings, No Change in Fair Value
ACCUMULATE
We think Woodside’s decision to purchase half of BHP
Billiton’s Scarborough area assets in the Carnarvon Basin,
offshore Western Australia a good one. It adds materially to
Woodside’s resource position and is another plank towards
the company maximising value on its existing Western
Australian infrastructure base. Woodside will pay USD 250
million upfront, and a further USD 150 million upon a fi nal
investment decision, or FID, to develop Scarborough. All-up
Scarborough contingent (2C) gas resources are estimated
at 8.7 trillion cubic feet, or Tcf) of which Woodside’s share
is 30% or 2.6 Tcf. The purchase equates to a 32% increase
on Woodside’s equity 2C gas resources, excluding Canadian
shale gas, and a meaningful 35% increase to group equity
proven and probable gas reserves should Scarborough
achieve FID. Gas is acquired at a modest USD 0.15/mcf
of resource and no further appraisal drilling is required.
We make no change to our no-moat and high fair value
uncertainty ratings. At AUD 27.55, Woodside’s shares are
20% undervalued. Oil price appreciation towards our USD
60 long-term forecast
For more detailed information
Good luck to the WPL shareholders
kind regards, notthemama
WPL Price at posting:
$27.43 Sentiment: Hold Disclosure: Held
(20min delay)