Fat Prophets put out a report on WPL on the 20th November some of the issues raised are relevant to MEO.I have included part of the report which makes interesting reading. With positive results it makes MEO look very attractive. The comment of WPL picking up "good investments" is very interesting.
WPL - 20 November 2012 BUY Woodside Petroleum - Coleman takes Woodside on OE odyssey
A busy third quarter of production for Woodside was coupled with the sale of a minority position in the Browse LNG project and more announcements on international oil and gas exploration. It is this latter aspect that chief executive Peter Coleman has introduced to provide another avenue for growth other than through giant LNG projects. The strategy might prove far-sighted as costs continue to balloon in Australian-based resource projects. A better balance in the "company" portfolio has appeal subject to picking some "good investments".
Ever since the North West Shelf (NWS) project transformed "Woodside Petroleum" fortunes and future, the company has seemingly treated oil and gas exploration more as a secondary activity. The very high profile LNG projects that lobbed up on "Woodside" plate, courtesy of its long involvement in the NWS, were logically gobbled up by the company.
With Asian demand for LNG bordering on "insatiable," investing in these long term projects on the back of the abundant NWS gas fields made eminent sense. It still does, to a degree.
A feature of the last 12 months in Australia has been the souring of the attractiveness of investing such huge sums not only into LNG projects in Australia, but nearly all major resource projects. The rise of the Australian dollar has dented the financial return metrics that previously made these investments look like no-brainers. Lower commodity prices have further tainted the equation and finally, rising input costs such as skilled labour have been the coup de grace for some projects while severely hurting others.
Specifically for Woodside, its Browse LNG project has delayed its final investment decision as a plethora of issues dog the process. The Western Australian government will not agree to allowing a floating offshore LNG process (preferred by "Woodside" partner, Shell) as it will eliminate thousands of potential onshore jobs, even though it could be up to "US$9 billion cheaper" than an onshore facility, according to an analysis by JP Morgan.
MEO Price at posting:
28.0¢ Sentiment: Hold Disclosure: Held
