Woodside May Sell Assets, Seeks Debt to Fund Growth

By Angela Macdonald-Smith

Feb. 18 (Bloomberg) -- Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, may sell some assets and will take on more debt to help fund its expansion in liquefied natural gas.

Depending on the price of oil and on exchange rates, the company will need as much as $1.7 billion of “external additional funding” this year, Perth-based Woodside said today in a presentation. It reported record full-year profit of A$1.79 billion ($1.1 billion), matching analyst estimates.

Chief Executive Officer Don Voelte, 56, said in November 2009 capital spending may jump 33 percent to A$7.3 billion ($4.7 billion), mostly because of the construction of the Pluto LNG project in Western Australia. Oil prices have slumped more than 76 percent since reaching a record in July of $147.27 a barrel, prompting expectations by analysts including JPMorgan Chase & Co. the company may need to divest some fields or sell shares.

“Depending on what price they get, probably the most favored option is to sell down non-core assets and raise a bit of debt” to fund the investment program, said Mark Greenwood, a Sydney-based energy analyst at JPMorgan. The company’s interest in the Otway natural gas project off southeastern Australia is probably a candidate for sale, he said.

Woodside, 34 percent owned by Royal Dutch Shell Plc, gained 51 cents, or 1.6 percent, to A$32.91 in Sydney trading at 3:06 p.m. local time, after earlier falling as low as A$31.95. The gain compared with a drop of as much as 3.2 percent in the exchange’s benchmark energy index.

More Debt

The company signed loan agreements of $1.5 billion last year and agreed additional debt of $800 million in January. “Further debt facilities are under consideration,” Chief Financial Officer Mark Chatterji said today. The company has no plans for a share sale, he said.

Woodside will probably turn to the U.S. bond market for the debt, Greenwood said.

The company has also cut or deferred A$500 million of “non- critical” spending since November, and is considering “several hundred million dollars” of additional reductions, Chatterji said on a conference call. The cutbacks won’t slow progress on any of Woodside’s LNG development ventures or affect oil drilling plans in Western Australia, Voelte said.

All assets outside the company’s LNG-focused regions of Western Australia and the Timor Sea are under review for potential divestment, Voelte said, adding there will be no “fire sale.” None of the LNG assets, including Pluto and stakes in the Browse and Sunrise ventures, are for sale, he said.

Algeria, U.S.

Woodside has stakes in ventures in Algeria and Libya, and a business in the Gulf of Mexico, where exploration has been slowed, Voelte said. A dividend reinvestment plan will be maintained during the construction of Pluto to boost funds.

Full-year profit jumped 73 percent in the year ended Dec. 31 after prices and production rose, from A$1.03 billion, Woodside said in a separate statement to the exchange. The profit was within Woodside’s forecast last month of A$1.75 billion to A$1.8 billion.

Net income was cut by one-time charges of A$46 million, mostly for the suspension of an LNG import project in California. Before one-time items, profit gained 55 percent to A$1.83 billion. Sales rose 56 percent to A$5.99 billion on output that advanced 15 percent to 81.3 million barrels of oil equivalent.

Production Forecast

Woodside today maintained a forecast for production this year of between 81 million and 86 million barrels.

The start-up of the 90 percent-owned Pluto project, due in late 2010, will more than double Woodside’s production of LNG, demand for which may rise at 7 percent a year through 2020, the company estimates. An expansion of Pluto, for which Woodside has yet to secure gas supply, may start up in the first half of 2013, Voelte said. The company is also seeking to develop the Browse LNG project off the far northwest coast and the Sunrise venture in the Timor Sea.

Woodside expects to drill as many as 12 exploration wells this year, mostly in Australia, and also in Libya, the U.K., Sierra Leone and Brazil, it said.

Woodside increased its proven reserves by 8.2 percent last year to 1.33 billion barrels of oil equivalent, buoyed by a gain at Pluto and the acquisition of Shell’s North West Shelf oil assets, while gas reserves at Otway were revised lower. Proven and probable reserves edged up 0.9 percent to 1.7 billion barrels.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net