SYDNEY: Shares in Woodside Petroleum jumped on Wednesday following the Australian energy producer's decision to pay US$2.75 billion to acquire stakes in liquefied natural gas projects from US firm Apache.
The deal came as Woodside delayed a decision Tuesday to invest in the Browse gas-export project off Western Australia to take advantage of lower costs for the multi-billion-dollar venture.
The oil and gas giant closed 3.02 percent higher to Aus$35.50 (US$28.93) on Wednesday. It fell 2.6 percent to Aus$34.46 on Tuesday along with declines in other energy stocks.
The acquisition transaction includes a 13 percent interest in Wheatstone LNG and a 65 percent interest in the Julimar-Brunello upstream gas development, both in Western Australia.
Woodside also acquires a 65 percent interest in the Balnaves oil project off the coast of Western Australia, as well as a 50 percent interest in the Kitimat LNG venture in Canada.
The energy market has been challenged by tumbling oil prices, which plunged further following a decision by the Organisation of the Petroleum Exporting Countries last month against cutting production.
US benchmark West Texas Intermediate for January delivery has dropped about 50 percent since June as crude supplies have increased while demand growth has slowed.
The oil slump has also raised question marks over LNG projects.
But Woodside's chief executive Peter Coleman said it presented an opportunity for investment in high-quality projects, adding that the transaction was a "natural fit" with his company's portfolio.
"We are now in a position to take advantage of challenging market conditions and use cash reserves and existing debt facilities to acquire very high quality assets," he said in a statement.
The Browse decision was delayed to also take advantage of the changing market conditions, which could lead to lower costs within the business in nine to 18 months, Coleman added in a teleconference Tuesday.
"I expect over the next 12 months or more, we'll start to see cost wash through the business. So at the end of the day it's all about margin," he said.
UBS energy analyst Nik Burns said the acquisition was "fairly safe" and filled a production hole which was looming.
"But strategically we found it curious," he told AFP, noting that Woodside had bought into ventures at later stages of development where they would not have as much scope to extract additional value from them.
Further buying opportunities could appear if the oil price falls further, Burns said.
"We expect to see more assets coming into the market at good prices over the next six to 12 months."
Comments
Comments are closed.