FINANCE Assignment: Woodside Petroleum Analysis - FINC101

This finance assignment analyzes Woodside Petroleum Ltd, focusing on its financial aspects. The assignment begins with an overview of Woodside's background, identifying a key opportunity (constant demand for petroleum and LNG) and two threats (declining oil prices and growing demand for alternative energy sources) based on competitor analysis. It then distinguishes between short-term (bank loans) and long-term (bond issues) debt financing instruments used by the company. A bond valuation calculation is presented, demonstrating that the market price of the bonds is higher than their par value. Finally, the assignment discusses the initial credit rating (BBB+) and the impact of a high-interest coverage ratio on bond value, indicating a positive influence on the company's creditworthiness and bond demand. The analysis draws upon references to support the financial insights.

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
3.a) Mentioning the background of Woodside Petroleum Ltd, where one key opportunity and
two threats are disclosed from competitor analysis:..................................................................2
3.c) Depicting one example of short term debt and long-term debt, while indicating the
financing instrument used by Woodside Petroleum Ltd:...........................................................2
3.di) Depicting whether the bond price is lower or higher than the par value:..........................2
3.dii) Commenting on the initial credit rating of the bond and stating the impact of bond
value when interest coverage ratio is high:................................................................................3
Reference and Bibliography:......................................................................................................4

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3.a) Mentioning the background of Woodside Petroleum Ltd, where one key
opportunity and two threats are disclosed from competitor analysis:
Woodside Petroleum Ltd mainly falls under Oil and Gas industry, while its mainly
products are Petroleum and LNG. The company has been operating in Australia, while its
operations are conducted all over the world (Woodside.com.au 2018). The major opportunity
for Woodside Petroleum is the constant demand for Petroleum and LNG, as they are demand
by both business houses and local customers. On the other hand, two fore most threat for the
organization is the continued decline of oil price in world market, which is hampering the
overall revenue generated by the organization. the second threat that is hampering
profitability of the company is the growing demand for solar and thermal power among
customers. This increment in the demand for substitute energy product is relevantly declining
the revenue of the organization, which in turn is affecting its competitiveness in the market.
3.c) Depicting one example of short term debt and long-term debt, while indicating the
financing instrument used by Woodside Petroleum Ltd:
Long term debt financing example is mainly identified to be bond issue, which allows
the organisation to acquire the level of capital to support their financing needs. In addition,
the short-term debt financing example are bank loans or overdraft conducted by the company
to support its activities. In addition, the evaluation of annual report, C2 and C3 relevant debt
accumulated by the company during 2016 are adequately depicted (Woodside.com.au 2018).
Moreover, bonds and debt facilities are accumulated by the company, which helped in raising
the level of funds to support their operational activity.
3.di) Depicting whether the bond price is lower or higher than the par value:
Particulars Value

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Face Value 1,000.00
Coupon Rate p.a. 3.65%
Half Year Coupon Rate 1.83%
Coupon Payment 18.25
Yield Rate 3.10%
Half Yearly Yield Rate 1.55%
Total Period 7
No. of Coupon Payments 14
Market Price of Bonds 1.83% * 1000 * (((1 - ((1 + 1.55%)-14)) / 1.55%)) +
(((1000 / ((1 + 1.55%)14))))
Market Price of Bonds 1,034.37
The above table mainly indicates the overall market price of Woodside Petroleum,
which is at 1,034.37, while the actual par value of the bond is 1,000. Thus, it could be
understood that the current market price is higher than the par value of the bond.
3.dii) Commenting on the initial credit rating of the bond and stating the impact of
bond value when interest coverage ratio is high:
The initial credit rating for the bond provided by Standard & Poor’s and Fitch rating
is BBB+, as depicted in the enclosed article (Purvis 2015). The increment in interest coverage
ratio from 5 to 25 mainly depicts a positive sign for the company. this increment could
eventually help in improving the credit rating of the organisation, as they would be able to
support their payments conducted in bonds. This increment could eventually improve credit
rating of Woodside Petroleum, which could increase demand for their bonds.

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Reference and Bibliography:
Bond, P.H. and Brown, P.K., 2017. Rating valuation: principles and practice. Routledge.
Jordan, B., 2014. Fundamentals of investments. McGraw-Hill Higher Education.
Purvis, B. (2015). Woodside Petroleum raises $1 billion with biggest bond sale. [online] The
Sydney Morning Herald. Available at: http://www.smh.com.au/business/mining-and-
resources/woodside-petroleum-raises-1-billion-with-biggest-bond-sale-20150227-
13qo4d.html [Accessed 25 Jan. 2018].
Woodside.com.au. (2018). Woodside Energy | Home. [online] Available at:
http://www.woodside.com.au/Pages/home.aspx [Accessed 25 Jan. 2018].