Interesting Article on Woodside, they were planning to invest 2.5bil in Leviathan, for that amount there is few target in the market...Afren, Ophir, Maurel...Premier Oil,...
WSJ : Woodside Petroleum WPL.AU +0.76% should step on the gas.
The company said Wednesday it ditched plans to buy a quarter of Israel's largest natural gas field for around $2.5 billion after final deal talks broke down. It's the latest in a string of project delays and cancellations and leaves Australia's second biggest oil producer behind BHP Billiton BLT.LN -0.18% without a source of growth as domestic production plateaus.
The Israeli project, named Leviathan, seemed the growth possibility within nearest reach after Woodside delayed the multibillion dollar Browse liquefied natural-gas export project off the coast of West Australia by at least two years. Woodside also abandoned plans to expand its Pluto LNG terminal, another Western Australia project, after failing to find enough gas there.
Macquarie Group MQG.AU -0.48% forecasts the company's total production will fall by around 20% by the end of this decade as the North West Shelf, Woodside's cornerstone asset for the past 25 years, matures. Without new projects or acquisitions, the broker reckons earnings will fall by around 35% over the same period.
One obvious next step is to make an acquisition. With low debt of around $1.5 billion, a market capitalization $31 billion, strong recurring cash flows and low capital expenditures, it has the capacity to significantly gear up its balance sheet for the right deal.
Close to home the most obvious target is Australian listed Oil Search, which is spending heavily now to ramp up production at its operations in Papua New Guinea. But Oil Search has major strategic investors in the Papua New Guinea government and an Abu Dhabi sovereign wealth fund, which could complicate a deal.
An easier-to-digest option would be to buy at the asset level. Chief Executive Peter Coleman has said he'd like to take the company back to its roots and look for opportunities to expand in oil production. This could work as major oil companies shed assets globally as they cut capital expenditures. U.S. shale could be another target, though Mr. Coleman has said he'd likely prefer to partner with dedicated unconventional gas players.
Despite the uncertain long-term growth outlook, Woodside shares trade near a three year high as investors are attracted to its 5% dividend yield. Sustaining that dividend shouldn't be a challenge in the near term given ample free cash flow. But repeated misses to fill its pipeline with new projects leaves Woodside needing a fast-track plan for the future.