Woodside - Result 2018 - Intelligent Investor

02/03/2019 Woodside: Result 2018 - Intelligent Investor
Woodside: Result 2018

For the first time in years, Woodside is brimming with growth
opportunities and the market has started to notice.
by Gaurav Sodhi 21 Feb 2019 5 min 0
Woodside Petroleum (WPL)
HOLD
Current price: $35.66 at 16:40, 01 Mar 2019

Price at review: $37.23 on 21 Feb 19
Recommendation Guide
BUY HOLD SELL
below 34.00 up to 45.00 above 45.00
HOLD at $37.23
Max Portfolio weighting 6%
Business risk Low-Medium
Share price risk Medium
Key Financial Data −

12 month price range $28.55 - $39.00
Market cap (m) 33,383
Total shares (m) 936
Franking 100%
Industry Energy
Per Share
Show Summary
Year to Jun Sales Cashflow Earnings Dividends Franking Book Value Av
https://www.intelligentinvestor.com.au/woodside-result-2018-1903231 1/7
Year to Jun Sales Cashflow Earnings Dividends Franking Book Value Av
2018 $0.08 $5.07 $2.16 $2.04 100% $26.50
2017 $0.06 $3.62 $1.54 $1.41 100% $22.60
2016 $0.07 $4.23 $1.42 $1.13 100% $24.10
Capital Structure
Total Debt Interest Long Term Debt Percent Debt Preferred Stock Share E
$5,864,267 $306,036 $5,684,330 19% $0 $24,7
Key Ratios
Year Operating Margin (%) Income Tax Rate (%) Employees ($T) Return on
2018 70.9 30 3.7
2017 72 28.5 3.6
2016 65.5 27.4 3.5
Profit & Loss

Show Summary
2018 2017 2016
Revenue ($M) 7,536.1 5,050 5,715.9
Operating Margin (%) 70.9 72 65.5
Depreciation ($M) -2,055.8 -1,523.1 -1,824.2
Amortisation ($M) 0 0 0
Net Profit Before Abs ($M) 1,990.6 1,312.8 1,199.6
Net Profit After Abs ($M) 1,932.6 1,312.8 1,199.6
Long Term Debt ($M) 5,684.3 6,396.2 6,767.6
Shareholders Equity ($M) 24,779 19,294.9 20,507.2
EBITDA ($M) 5,341 3,638 3,742
EBIT ($M) 3,286 2,115 1,918
EBT before Abs ($M) 3,026 2,008 1,852
Cashflow
2018 2017 2016
Customer Receipts ($M) $0 $0 $0
Net Operating Cashflow ($M) $4,670 $3,077 $3,575
Net Investing Cashflow ($M) $-2,511 $-2,010 $-3,418
Net Financing Cashflow ($M) $-225 $-1,032 $70
Market and Earnings

2017 2016
Market Cap ($M) $27,868 $26,251
Dividend Yield (%) 3.8% 3.5%
Balance Sheet
Show Summary
2018 2017 2016
Cash ($M) 2,371.8 407.7 393.9
Debtors ($M) 376.9 364.1 273.6
Other Debtors ($M) 313.1 253.8 342.7
Prepayments ($M) 0 0 0
Inventories ($M) 219.6 238.5 205.9
Current Investments ($M) 76.5 0 0
Other Current Assets ($M) 43.9 34.6 27.6
Total Current Assets ($M) 3,416 1,299 1,244
Receivables ($M) 294.7 198.7 237.7
Inventories ($M) 0 0 6.91
Property, Plant & Equipment ($M) 48,446 42,863 44,545
Accumulated Depreciation ($M) -21,437 -17,813 -17,673
Intangibles ex. Goodwill ($M) 0 0 0
Goodwill ($M) 0 0 0
Future Income Tax Benefit ($M) 1,670 1,442 1,334
Non-Current Investments ($M) 42.5 39.7 41.5
Other Non-Current Assets ($M) 5,946 4,536 4,472
Total Non-Current Assets ($M) 34,963 31,267 32,964
Total Assets ($M) 38,379 32,565 34,208
2018 2017 2016
Accounts Payable ($M) 830.3 885.9 754.6
Provisions ($M) 409.5 360.3 404.9
Short Term Debt ($M) 179.9 97.4 105
Other Current Liabilities ($M) 60.9 51.3 66.3
Total Current Liabilities ($M) 1,481 1,395 1,331
Creditors ($M) 0 0 0
Long Term Debt ($M) 5,684 6,396 6,768
Provisions ($M) 5,164 4,288 4,338
Other Non-Current Liabilities ($M) 90.7 126.9 127.1
Total Non-Current Liabilities ($M) 10,939 10,812 11,233
Total Liabilities ($M) 12,420 12,206 12,564
Share Capital ($M) 12,581 8,871 9,562
Reserves ex. Share Premium ($M) 1,352 1,233 1,311
Share Premium Reserve ($M) 0 0 0
Retained Profits ($M) 10,846 9,191 9,634
Outside Equity Interest ($M) 1,180 1,064 1,137
Total Shareholders Equity ($M) 25,959 20,359 21,645
Almost everything went right for Woodside Petroleum

(https://www.intelligentinvestor.com.au/company/Woodside-Petroleum-Limited-
WPL-251689) last year. The oil price was higher than expected, production was
strong, and costs were kept tight. Little surprise, then that profits soared, cash
flow was abundant, and dividends were generous.
It’s hard to imagine that this was a forlorn stock just over a year ago when we
first upgraded (https://www.intelligentinvestor.com.au/appreciating-woodsides-
assets-1879746) it, with investors fretting over stagnant production and declining
reserves.
So what’s changed?
Key Points
Strong result
Growth opportunities developing nicely
Production increases to come
Higher prices, more ouptut

The oil price rise has undoubtedly helped. Oil prices averaged over US$70 a
barrel, compared to US$56 last year, and delivered a bonanza; almost US$900m in
revenue was added by higher oil prices alone.
Production rose 8% to 91m barrels of oil equivalent (mmboe) as Wheatstone

contributed to output but management suggested modest growth next year,
expecting between 88–94mmboe. This has been a consistent bugbear of the
market, but we aren’t concerned.
Woodside 2018 result

+/(–)
Year to Dec 2018 2017
(%)
Production (mmboe) 91.4 84.4 8
Revenue (US$m) 5,240 3,975 32
EBITDA (US$m) 3,814 2,918 31
EBIT (US$m) 2,278 1,714 33
NPAT (US$m) 1,364 1,069 28
EPS (US cents) 148 123 20
DPS (US cents) 144 88 47
For the first time in years, Woodside is heaving with growth opportunities that
should see production reach 100mmboe by 2020 and we think there is ample
scope to exceed that in future years.
Opportunity
Wheatstone, bought below replacement cost at the markets nadir, is performing
above expectations and has proved an astute acquisition.
As noted in our original investment case, Woodside is using above-ground

infrastructure to monetise new gas fields.
Gas from the Scarborough field will be processed through new and existing
facilities at Pluto; Browse could finally be commercialised through North West
Shelf infrastructure; and an interconnector between Pluto and the North West
Shelf will provide opportunities to run these facilities more efficiently.
Woodside still has to navigate tricky negotiations between various asset owners,
but its strategy is beginning to take shape and the market is starting to price in
some success.
Management hinted that it was seeking to sell some of the company's

Scarborough stake which should draw attention to the inherent value of this
controversial project. Scarborough has not been monetised for two decades
because of concerns around cost, gas quality and distance. That will change,
although we still have not added the project to our valuation. Browse is also
absent from our valuation which, at this early stage, is probably correct.
Yet there is even more optionality inside Woodside’s portfolio. A final investment
decision will be made this year on a large, proven oil field offshore Senegal and it
should highlight strong economics. This production, alongside a few other growth
options, still don’t appear to be priced by the market.
Strong base
Pluto and North West Shelf still account for about 85% of production and the bulk
of today’s value. These assets again showed staggering profitability with an
average cash cost of under US$4 per barrel of oil equivalent (boe).
Depreciation and amortisation account for about US$16 boe of costs but suck in
far less cash than this suggests. The depreciation and amortisation charge reflects
high start-up costs being capitalised, so this is important in counting return on
capital, but it means profits tend to understate cash flow.
That was again true this year, with Woodside generating US$1.3bn in accounting
profit but US$1.5bn in free cash flow. With the balance sheet already in pristine
shape, Woodside paid out handsome dividends of US$1.44 per share.
That Woodside has paid heavy capital expenditure and higher dividends without
damaging the balance sheet is impressive. It neatly demonstrates that, when oil
prices exceed expectations, Woodside is more than an energy producer: it is a
gold mine.
This was an outstanding result from a business that, after a long slumber, is
starting to reach its potential. With growth options proceeding nicely and base
production operating beautifully, we’re raising our Buy price from $31 to $34. For
now, HOLD.
Note: Our Model Growth

(https://www.intelligentinvestor.com.au/portfolios/growth) and Model Income
(https://www.intelligentinvestor.com.au/portfolios/income) portfolios own shares in
Woodside.
Note: The Intelligent Investor Equity Growth Fund

(https://www.investsmart.com.au/invest-with-us/intelligent-investor-equity-growth-
model/7) and the Intelligent Investor Equity Income Fund
(https://www.investsmart.com.au/invest-with-us/intelligent-investor-equity-income-
model/8) own shares in Woodside.
Staff members may own securities mentioned in this article.
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02/03/2019 Woodside: Result 2018 - Intelligent Investor

Woodside: Result 2018

by Gaurav Sodhi 21 Feb 2019 5 min 0

Woodside Petroleum (WPL)

Current price: $35.66 at 16:40, 01 Mar 2019

Max Portfolio weighting 6%

Business risk Low-Medium

Share price risk Medium

Key Financial Data −

Market cap (m) 33,383

Total shares (m) 936

Year to Jun Sales Cashflow Earnings Dividends Franking Book Value Av

2018 $0.08 $5.07 $2.16 $2.04 100% $26.50

2017 $0.06 $3.62 $1.54 $1.41 100% $22.60

2016 $0.07 $4.23 $1.42 $1.13 100% $24.10

$5,864,267 $306,036 $5,684,330 19% $0 $24,7

2018 70.9 30 3.7

2017 72 28.5 3.6

2016 65.5 27.4 3.5

Profit & Loss

Revenue ($M) 7,536.1 5,050 5,715.9

Operating Margin (%) 70.9 72 65.5

Depreciation ($M) -2,055.8 -1,523.1 -1,824.2

Net Profit Before Abs ($M) 1,990.6 1,312.8 1,199.6

Net Profit After Abs ($M) 1,932.6 1,312.8 1,199.6

Long Term Debt ($M) 5,684.3 6,396.2 6,767.6

Shareholders Equity ($M) 24,779 19,294.9 20,507.2

EBITDA ($M) 5,341 3,638 3,742

EBIT ($M) 3,286 2,115 1,918

EBT before Abs ($M) 3,026 2,008 1,852

Customer Receipts ($M) $0 $0 $0

Net Operating Cashflow ($M) $4,670 $3,077 $3,575

Net Investing Cashflow ($M) $-2,511 $-2,010 $-3,418

Net Financing Cashflow ($M) $-225 $-1,032 $70

Market and Earnings

Market Cap ($M) $27,868 $26,251

Dividend Yield (%) 3.8% 3.5%

Cash ($M) 2,371.8 407.7 393.9

Debtors ($M) 376.9 364.1 273.6

Other Debtors ($M) 313.1 253.8 342.7

Inventories ($M) 219.6 238.5 205.9

Current Investments ($M) 76.5 0 0

Other Current Assets ($M) 43.9 34.6 27.6

Total Current Assets ($M) 3,416 1,299 1,244

Receivables ($M) 294.7 198.7 237.7

Inventories ($M) 0 0 6.91

Property, Plant & Equipment ($M) 48,446 42,863 44,545

Accumulated Depreciation ($M) -21,437 -17,813 -17,673

Intangibles ex. Goodwill ($M) 0 0 0

Future Income Tax Benefit ($M) 1,670 1,442 1,334

Non-Current Investments ($M) 42.5 39.7 41.5

Other Non-Current Assets ($M) 5,946 4,536 4,472

Total Non-Current Assets ($M) 34,963 31,267 32,964

Total Assets ($M) 38,379 32,565 34,208

2018 2017 2016

Accounts Payable ($M) 830.3 885.9 754.6

Provisions ($M) 409.5 360.3 404.9

Short Term Debt ($M) 179.9 97.4 105

Other Current Liabilities ($M) 60.9 51.3 66.3

Total Current Liabilities ($M) 1,481 1,395 1,331

Long Term Debt ($M) 5,684 6,396 6,768

Provisions ($M) 5,164 4,288 4,338

Other Non-Current Liabilities ($M) 90.7 126.9 127.1