Woodside Petroleum Ltd (ASX: WPL) is a global energy supplier that is specialised in the upstream petroleum sector. Woodside supplies oil and gas and is the largest LNG producer in Australia. Woodside’s market capitalisation is A$20.5 billion.

What are the key points of Woodside Petroleum’s report?

Woodside Petroleum produced 25.9 MMboe in Q2 2020 (period ended 30 June 2020), up 7% from Q1 2020 and up 28% from HY19. Woodside Petroleum sales volume in Q2 2020 is 27.1 MMboe, up 13% from Q1 2020. Delivered sales revenue in Q2 2020 is $768 million, down 29% from Q1 2020.

Woodside Petroleum continues to implement expenditure reduction targets that were announced on 27 March 2020. This includes, firstly, Woodside Petroleum will reduce approximately 50% of its 2020 total expenditure. Secondly, Woodside Petroleum will defer targeted final investment decision for Scarborough, Pluto Train 2 and Browse.

Woodside Petroleum continues to execute activities for the Sangomar Field Development Phase 1 and has submitted applications for production licences and retention lease renewals for the Burrup Hub.

Woodside Petroleum also announced that the company’s HY20 profit results are expected to recognise a non-cash, post-tax impairment loss of US$3.92 billion. This is comprised of US$2.76 billion for oil and gas properties (including deferred PRRT and income tax assets/liabilities), and US$1.16 billion for exploration and evaluation assets (including deferred PRRT and income tax assets/liabilities). It is also expected to include a non-cash, post-tax nerous contract provision for the Corpus Christi LNG sale and purchase agreement of US$447 million. This brings the total post-tax losses of US$4.37 billion.

What is the outlook for Woodside Petroleum?

The short-term outlook for Woodside Petroleum is negative. This short-term outlook is based on the challenging operating environment Woodside Petroleum is facing due to COVID-19 and a weakening oil price. However, one positive is that Woodside Petroleum management has hedged 13.35 million barrels of oil, pricing between July and December 2020 at an average price of $33.03 per barrel, which helped Woodside Petroleum revenue during the dip in the oil price a few months ago.

However, the long-term outlook for Woodside Petroleum is positive. This outlook is based on several long-term projects that should underpin future growth of the company. Firstly, the developments of the SNE field located on the west coast of Senegal, Africa. Secondly, development of the Scarborough gas field located offshore Western Australia. Finally, the Browse Basin gas field located offshore Western Australia. In addition to these long-term projects, the oil price should strengthen particularly if global economic growth returns in 2021.

What is the market reaction?

The market reaction to Woodside Petroleum is positive, Woodside Petroleum share price is up around 1.8% and is currently trading at A$21.57. This announcement is positive as the Australian market is up around 1.2%. Woodside Petroleum trades at a forward P/E ratio in the low-thirties and has an annual dividend yield of 4.3%.

 


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July 15, 2020