Analysis of Woodside Petroleum Limited

Analysis of Woodside Petroleum Limited
Introduction
Woodside Petroleum is listed on Australian Stock Exchange and is one of the company under
ASX 2000. The company is engaged in exploration of oil and gas along with its development,
production and marketing. Woodside Petroleum has three business segment comprising of
production, development and trading and shipping activities. The production segment of the
company is in North West Shelf. Pluto Liquefied Natural Gas and Australia Oil.
Development segment consists of Floating Liquefied Natural Gas and Liquefied Natural Gas
(Wheatstone). Further, the marketing segment of the business comprise of major markets like
USA, Canada, Myanmar, Senegal and other countries. The company is the largest operator of
oil and gas production in entire Australia and also Australia’s largest independent and
dedicated oil company. The company is headquartered in Perth, Australia.
The company marks its presence pan globe with its major operations in the country and Asia
Pacific region and America. The company has a market capitalisation of $32.7 Billion with a
beta of 0.96 compared to ASX 200, a proxy of market. The dividend yield of the company is
1.27 and Return on Equity of 8.38%. A brief snapshot of overall financial of the company
coupled with industry performance is presented here-in-below:
Overall
Beta: 0.96
Market Cap (Mil.): $32,699.87
Shares Outstanding (Mil.): 936.15
Dividend: 1.27
Yield (%): 3.88
Financials WPL.AX Industry Sector
P/E (TTM): 16.56 4.98 11.35
EPS (TTM): 2.11 -- --
ROI: 6.02 0.78 12.89
ROE: 8.38 0.05 15.36
(Reuters.com, 2019)
The trading price of the stock of the company is 34.93 AUD as on 5th May, 2019. Also, Peter
Coleman is the Chief Executive Officer of the company and he has more than 30 years of
experience in the oil and gas business. (Dun & Bradstreet, Inc, 2019)
Industry of the company
The company operates in Oil and Gas sector with major competitors:
(a) Santos Limited;
(b) Origin Limited;
(c) BHP Group Limited ; (Dun & Bradstreet, Inc, 2019)
(d) Apache Corporation;

(Dun & Bradstreet, Inc, 2019)
Goals of the company
The major goals of the company is to create an enduring value for the shareholders with
superior returns across three distinct time horizon i.e
(a) Horizon 1 comprising of 2017-2021 wherein the company seeks to explore new revenue
streams, expanding the LNG market, exploration and acquisition for inorganic growth.
(b) Horizon 2 comprising of 2022-2026 wherein the company seeks to explore new revenue
streams, leverage existing infrastructure and increase supply to the existing market and
customer
(c) Horizon 3 starts from 2027 and has no end period wherein the company seeks to make
capital efficient development and explore new major hubs for business.
These are the major steps through which the company seeks to develop the market and
increase the return to shareholders. (Woodside, 2019)
Analysis
Risk Characteristic of the company
Systematic risk refers to the risk which cannot be diversified and shall always be present
while unsystematic risk refers to the risk which accrue on account of unplanned activity.
Woodside Limited is engaged in business of oil exploration which is subject to large
environmental impacts. As a result, lot of precautionary measures are required to be taken by
the company to be in compliance with various environmental risk
Second, the business of oil and gas is majorly an oligopoly market and prices are determines
by cartel running in Middle East. The huge volatility in the prices of oil and gas creates a
deep impact on the profitability of the business.
The third risk that underlines the company is the declining reserves of oil and gas in the
disposal of company on account of scarcity. The company had approximately 14 years of
reserve life as on 2015. (Pearson, 2019)
Changing climate also has significant impact on the business which shall impact the oil
reserves in the globe.
Other risk which are natural to every business includes currency risk, credit risk and market
risk etc.
Time Value of Money
The concept of time value revolves around the fundamental that money in hand today is of
higher worth than money in hand tomorrow. The concept is based on inflation and risk.
Further, it is believed static money value decrease with period of time on account of inflation
and earning capacity of money.

The concept of time value of money is the core of finance and states that money in hand can
be invested to earn interest, dividend etc. The key terms that are used in the theory of time
value of money has been detailed as under:
(a) Present Value of Money: It represents the worth today;
(b) Future Value of Money: It represents the future worth of the present money;
(c) Interest: the rate generally the return on treasury securities is considered.
In case of Woodside Limited, if $ 100 has been invested three years ago, the same would
have resulted in the following:
Particulars Amount
Notional Principal 100
price on 05-05-16 23.63
No of shares 4.231909
Value on 02-05-19 34.93
Capital Appreciation 147.8
Dividend paid per share 4.34
Total dividend 18.36648
Total Capital on 02-05-2019 166.2
Return 66%
Return on treasury securities 2.29%
Return in 3 years 7.03%
(Verizon Media, 2019)
Thus, on the basis of above, it can be inferred that the stock investment on the shares of Orica
Limited has generated a 66% return over the period of three years compared to a meagre 7%
return in the treasury securities over the period. Thus, the company has been able to retain the
time value of money for the investors.
Further, the said concept can also be used for determining the future cash flows and
determining the present value of the company on the basis of computing free cash flow of
equity of the company for future years. The computation shall involve computing the
estimated growth rate of the company for future years and the stable growth rate, Post above,
computing of required rate of return on equity. Accordingly, the method can be applied to
determine the value of the company and the future prospects.
However, the above concept is equally proved in the above case wherein the investor has
earned a return higher than the return on treasury securities.
Evaluation of Financial performance of the company over the period of three years
Statement of Profit and Loss for three years
Income statement
WoodSide Limited
Currency in USD. All numbers in thousands
Revenue 31-12-
2018 % 31-12-
2017 % 31-12-
2016 % 31-12-
2015
Total revenue 52,40,000 100% 39,75,000 100% 40,75,000 100% 50,30,000