Pluto Surprise

Woodside Petroleum posted CY16 adjusted net profit of US$868 million, some 11% above Ord Minnett’s forecast, with the result driven by lower production costs.


The strong cost performance was most evident at the Pluto operation where unit production costs fell 40% from a year ago to US$3.30 a barrel of oil equivalent, a level which Woodside views as sustainable and with potential further upside.


Management indicated their focus is on bringing growth from their existing suite of assets over the near-to-medium term rather than via inorganic growth. This was underscored by the announcement that the company would seek to progress a mid-large scale expansion of Pluto.


We reiterate our Accumulate recommendation and our target price of $36.00. We believe the announcement to potentially expand Pluto serves to emphasise the reasons for our recent upgrade in recommendation.


Overall, we believe Woodside possesses growth optionality that could see production grow by 25% over 10 years through the addition of sanctioned and unsanctioned projects, such as Senegal and Myanmar.


For the full report, please contact your Ord Minnett adviser.

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