- Coleman says decision gives Woodside balance sheet `headroom'
- Asset acquisitions more likely than buying companies, he says
Woodside Petroleum Ltd.’s decision to ditch its proposed Browse liquefied natural gas project puts the company in a better position to make small acquisitions and develop existing assets in countries such as Myanmar, said Chief Executive Officer Peter Coleman.
“It provides more balance sheet headroom for us,” Coleman said Wednesday in a phone interview after the company announced it would scrap its plan to develop the Browse project in Australia with partners including Royal Dutch Shell Plc.
The oil and gas industry over the next couple of years is more likely to see purchases of assets rather than acquisitions of companies as buyers focus on exploration properties and deals with companies that lack cash flow, Coleman said. Woodside in December abandoned its $8 billion bid for Papua New Guinea-focused rival Oil Search Ltd.
With Woodside dropping Browse, analysts are questioning how Australia’s second-biggest oil company will expand future production. While the company agreed in 2014 to purchase Apache Corp.’s stakes in Australian and Canadian LNG projects for $2.75 billion, it scrapped a deal that year to buy a stake in Israel’s Leviathan gas development for as much as $2.6 billion.
“Investors will be asking, ‘Woodside has a solid production platform, but where is future growth coming from?”’ Nik Burns, a Melbourne-based analyst at UBS Group AG, wrote Wednesday in a note.
Woodside’s growth prospects are tied to its stake in the Wheatstone LNG project in Australia, which was acquired from Apache, Lu Wang, an analyst at Bloomberg Intelligence in Hong Kong, wrote Wednesday. Sanford C. Bernstein & Co. analysts said it’s likely Woodside “will have to buy to grow,” with Oil Search and InterOil Corp. in Papua New Guinea among the most obvious possible targets.
Asked about Oil Search, Coleman said: “you can quite comfortably cross that off the list.” Woodside also will look at “early monetization” of existing discoveries in Myanmar, Coleman said.
Woodside said it won’t go ahead with the project after the plunge in energy prices and that the Browse venture will prepare a new plan and budget for developing the gas resources off Western Australia. Floating LNG technology to process the gas offshore remains the preference, Woodside said.