Woodside Petroleum Share Price is Down on Signed SPA (ASX:WPL)

The Woodside Petroleum Ltd [ASX:WPL] share price is down today after its subsidiary, Woodside Energy Trading Singapore signed a sale and purchase agreement (SPA) with RWE Supply and Trading GmbH.

Woodside Petroleum is Australia’s largest independent oil and gas company.

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What’s the deal?

Woodside will be supplying RWE with 840,000 tonnes of liquified natural gas (LNG) per year. The deal starts in 2025 and has a length of seven years.

Woodside’s Meg O’Neill said the deal gives more proof that there’s still strong market demand for LNG through the second half of this decade.

As she said:

Customers are increasingly seeking to secure new energy supplies in a timeframe which supports the development of our Scarborough offshore gas resource and the expansion of the Pluto facility with the addition of a second LNG production train.

The SPA also provides the opportunity for Woodside and RWE to explore the potential for carbon-neutral LNG production and trading.

The two companies also signed a memorandum of understanding in October last year to explore hydrogen-related opportunities. According to the release, RWE is developing around 30 hydrogen projects, the majority in Europe.

Much of the fall out could be continuing from yesterday’s result announcement

Markets haven’t taken the news well today with Woodside shares down around 4.5% at time of writing.

Yet much of the fall out could be stemming from yesterday’s release of their full year 2020 results. Woodside reported a net loss after tax of US$4 billion mostly from write downs after oil and gas prices took quite a hit from the pandemic.

CEO Peter Coleman remained upbeat though. As he said:

Our disciplined balance sheet management has safeguarded Woodside’s financial resilience and positioned us to take advantage of emerging growth opportunities as markets recover. The potential strength of that recovery is already being signalled by the recent increase in oil price and record sport LNG prices achieved in Asia over the northern hemisphere winter.

Woodside declared a dividend of 12 cents, bringing the total dividend for the year to 38 US cents, a 58% drop from last year’s.

The WPL share price is trading at $24.18, dropping 7% from two days ago.

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Best,

 Selva Freigedo


Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.


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