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Woodside Lifts Stake in Gas Field, Consolidating Position in Western Australia

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02/14/2018 | 12:21 am


By Robb M. Stewart



MELBOURNE, Australia--Woodside Petroleum Ltd. (>> Woodside Petroleum Limited) is consolidating its hold on a promising natural-gas field off Australia's west coast, buying Exxon Mobil Corp.'s stake in the asset as it seeks to tap resources it can process through existing operations.



The move by Woodside, Australia's largest independent oil and gas company, comes as it pushes toward giving the go-ahead for several developments in the region in anticipation that global demand for liquefied natural gas will continue to surge and outpace available supplies in the coming years.



Woodside signed a deal Wednesday to buy Exxon's 50% interest in an offshore block that contains the bulk of the Scarborough natural-gas field for up to US$744 million, including a US$300 million payment when a final investment decision on developing the asset is made.



It is part of a push toward lower-cost development to boost production that includes expanding the existing Pluto LNG operation and connecting with the North West Shelf LNG facilities, it said.



To help pay for the acquisition and to raise additional funding, Woodside launched an about 2.5 billion Australian dollars (US$1.97 billion) equity raising, tapping investors with an offer of one new share for each nine shares held.



"The acquisition of the additional interest in Scarborough provides greater alignment, control and certainty over a low-cost, high value opportunity ahead of a global LNG supply gap," Chief Executive Peter Coleman said.



In recent years, Woodside has focused on rebuilding its resource base, including a US$2.8 billion deal in 2015 with Apache Corp. that included a 13% stake in the Wheatstone project and a US$350 million deal last year to buy ConocoPhilips's (>> ConocoPhillips) interest in three promising oil discoveries off Senegal. The US$34 billion Wheatstone LNG project began producing in October and delivered its first cargo to Japanese buyers in November.



Analysts have more recently been seeking signs the company is laying the foundation for the next leg in production growth.



Reporting an 18% rise in annual profit despite a dip in production, Mr. Coleman said 2017 had been a good year for the company as it made progress on its various projects, including working with venture partners on building a hub out of their operations for gas fields off Western Australia that makes use of existing infrastructure at the onshore Pluto LNG plant.



With the deal for Exxon's Scarborough assets, Woodside will hold a controlling 75% interest in the main block of the field, plus 50% stakes in three adjacent blocks. It bought BHP Billiton Ltd.'s Scarborough assets in 2016 in a US$400 million deal.



The bulk of Woodside's profit is derived from liquefied natural gas operations in Western Australia, where it operates the North West Shelf project that has been operating since 1984 and the Pluto LNG plant that began producing in 2012. Its partners in the ventures include BHP Billiton, Chevron Corp. and Royal Dutch Shell PLC.



Mr. Coleman said feasibility concluded during the last year on expanding the Pluto LNG operation, and progress was made negotiating with partners on the North West Shelf and prospective Browse project to process natural gas through the North West Shelf's Karratha plant, a vast operation with an export capacity of 16.9 million tons of LNG a year.



A final investment decision on the Browse development is set for 2021, after Woodside, Shell, BP PLC and others in 2016 abandoned an ambitious proposal to build a floating LNG operation. Woodside said it also expected a development plan for the SNE field in Senegal to be ready for an investment decision next year, while progress had been made on a drilling program in Myanmar.



News of the Scarborough acquisition came as Woodside said it recorded a net profit of US$1.02 billion in 2017 against a year-earlier profit of US$868 million. That was slightly below the US$1.06 billion median of analyst forecasts compiled by The Wall Street Journal.



With a slide in production over the year, sales and trading and processing revenue was down 4.1% for the year to US$3.91 billion from US$4.08 billion in 2016.



Production declined 11% in 2017 to 84.4 million barrels of oil equivalent, although the company has forecast a recovery to between 85 million and 90 million barrels this year as projects led by the Chevron-led Wheatstone gas-export venture in Western Australia ramp up.



The Perth-based energy said it would pay a final dividend of US$0.49 a share for a full-year payout of US$0.98, up 18% on the year before.





Write to Robb M. Stewart at robb.stewart@wsj.com





Stocks mentioned in the article : Woodside Petroleum Limited, ConocoPhillips
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