woodside set to rocket!, page-7

Pluto is barely a break even proposition as I understand it.

I think that's overstating it. All LNG projects benefit from additional trains because of the much smaller capex, but they are still profitable standalone.

Since then the cost has blown out and Pluto Reserves are thought to be a lot smaller.

I don't think Pluto reserves are any smaller. They just didn't get the reserves additions they wanted with expansion.

third parties have chosen Wheatstone over Pluto.

There is still plenty of third-party gas out there and exploration is continuing in the NWS. The problem is going to be the cost of piping that gas to Pluto. If Woodside pay the right price, they will get it. And let's face it, they are more desperate than most of the others now, so an equity gas buy is not only possible but likely - it will lessen the ROI of Pluto II but as I already said, Pluto II already benefits from significantly reduced capex, so it should still be economic.

Pluto was largely funded out of borrowings, some at a reasonably hefty interest rate.

And that would have all been considered in the financial metrics for FID. It's not like they woke up one day and suddenly realised "oh damn, I forgot we put that on the credit card!"

Pluto needs a second train for WPL to get a real boost as Browse is going nowhere and Sunrise is also stalled.

That goes without saying. But you can look at it in reverse - since Browse and Sunrise are both stalled it provides WPL with an opportunity to go after Pluto II.

Note WPL is, again, rebuilding an overseas presence.

This is a bad thing? Overseas is where the oil is anyway, and the market will shortly be awash with gas. I support the diversification, particularly into countries like Burma and Somaliland where exploration has been stalled due to political issues. It provides the last few opportunities for true frontier exploration outside the polar regions and ultra-deep sea.

Also, WPL has missed the shale train right in its own backyard.

No they haven't. The shale train hasn't left the station, in fact the shale train is still just a set of blueprints. Let the others chase the shale, prove the concept and take the risk for it. Woodside will have plenty of opportunity to evaluate and move into shale plays if/when the concept is proven.

The threat to WPL from shale as I see it is if WPL continue to ignore it like they did with "girlie gas" CSG. But then, given the unforeseen problems the CSG projects are having, this may have been a good dodge for WPL - not due to good judgement but rather luck. Shale in Australia is going to have its own set of challenges that we don't know about yet.

And WPL has a very different CEO now, so who knows what will happen?

The focus on LNG only has cost and the rebuilding is going to take some time.

Commercial shale in frontier basins is a decade away. WPL got Pluto into production in 7 years from discovery which was an astonishing achievement, and they trumped everybody else. If they'd diverted attention from LNG this wouldn't have happened. If they'd diverted it into shale they'd be a decade away from anything!

I guess the proof of the pudding for Pluto will be in the eating, the EPS numbers. That will tell us exactly how profitable Pluto is.