Woodside Sees Better-Priced M&A as Global Energy Giants Sell

Woodside Petroleum Ltd., Australia’s second-biggest oil and gas company, sees increasing opportunities to hunt down acquisitions as the world’s major energy producers focus on selling assets.

“M&A opportunities are coming onto the market,” Chief Executive Officer Peter Coleman told analysts today on a call after Woodside reported a 27 percent gain in first-half profit. “They are better priced than what they were two years ago, and we’ll take a long and hard look at those opportunities.”

While competitors concentrate on North America, state-owned oil companies have scaled back purchases, creating a more rational market, Coleman said, reiterating that the company is looking for investments of about $5 billion.

Global energy producers are facing pressure to cut spending, reduce exposure to hot spots such as Egypt and focus on the U.S., where oil production has reached the highest in more than 25 years. Apache Corp. is looking to sell its stake in the Wheatstone liquefied natural gas project under construction in Australia and a proposed LNG facility in Canada.

Asked if Woodside would be interested in any Apache assets in Australia, including the Wheatstone stake, Coleman said his company will “continue to look at those assets and other assets around the world.” He declined to comment further.

Woodside rose 0.8 percent to close at A$43.38 in Sydney, while the benchmark index climbed 0.2 percent.

Shell Buyback

With limited options to expand and boost production with its existing holdings, Woodside will be tempted to make an acquisition, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said today in a report. Such a deal could be “value negative for investors,” he said.

“Increasingly we expect management will want to grow rather than return cash to shareholders,” according to Beveridge.

The company is stepping up its search for global acquisitions after its $2.7 billion plan to buy back stock from Royal Dutch Shell Plc was blocked by shareholders, leaving Europe’s largest oil company with a larger, unwanted stake in the Australian energy company. The company’s bid to invest as much as $2.6 billion in an Israeli gas project collapsed in May.

While Woodside, operator of the A$15 billion ($14 billion) Pluto natural gas project in Australia, moves forward with overseas expansion, it’s planning the Browse LNG project in Australia. Woodside is targeting LNG buyers in Japan and is in advanced talks with some potential customers, Coleman said.

Woodside and the buyers are in a “tug of war” over price, according to the company’s CEO. Asian buyers are pushing for lower prices as the U.S. emerges as an LNG exporter.

An investment decision on Browse could be delayed until 2016, according to the Bernstein report.

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