Woodside Shares Up after Exiting Canadian LNG Operation (ASX:WPL)

At time of writing, the share price of Woodside Petroleum Ltd [ASX:WPL] is up 1.91%, trading at $22.95.

WPL shares staged a recovery in November on ‘back to normal’ trade, as you can see below:

ASX WPL - Woodside Share Price Chart


We look at WPL’s latest announcement with regards to it Kitimat LNG project in Canada, which the market clearly approved of. We also take a look at the outlook for WPL shares and what to look for when it comes to value stocks.

Highlights from today’s WPL announcement

Here’s how the company framed it (emphasis added):

Woodside has decided to exit its 50% non-operated participating interest in the proposed Kitimat LNG (KLNG) development, located in British Columbia, Canada.

The exit will include the divestment or wind-up and restoration of assets, leases and agreements covering the 480 km Pacific Trail Pipeline route and the site for the proposed LNG facility at Bish Cove.

Woodside will retain a position in the Liard Basin upstream gas resource. Woodside will work with Kitimat Joint Venture participant and operator Chevron Canada (Chevron) to protect value during the exit. Chevron announced its plan to divest its 50% interest in KLNG in December 2019.

The costs associated with the decision to exit KLNG are expected to impact 2021 net profit after tax (NPAT) by approximately US$40–60 million. These costs will be excluded from underlying NPAT for the purposes of calculating the dividend.

That last bit was the sugar hit WPL investors and shareholders likely wanted.

A hit to NPAT that doesn’t hurt their payout ratio is fine for the yield-hungry.

This is what the Australian Financial Review had to say about the move by Woodside:

Woodside bought into the early stage, ambitious Kitimat venture through its $US2.75 billion acquisition of assets from Apache in 2014, well before the collapse in oil and gas commodity prices and the deterioration in the outlook for huge new LNG projects.

Several proposals for capital-intensive western Canadian LNG projects have been shelved since then as developers prioritised nearer-term, higher-returning projects elsewhere.

LNG is staging a bit of a rally at the moment:

Asiang LNG Early Summer Rally

Source: Reuters

As a article outlines:

Asian spot prices for liquefied natural gas (LNG) rose to a nearly four-month high this week as cargoes were pulled into Europe amid firm restocking demand and for power generation demand in summer, trade sources said.

And as you can see from WPL’s revenue breakdown — the company is firmly focused on LNG:

Increase in LNG Sales Revenue

Source: Woodside Petroleum Ltd

What’s the outlook for WPL shares then?

Outlook for Woodside share price

Let’s start with a breakdown of who uses the most LNG, this will tell us more about WPL’s outlook.

As you can see below, Japan, China, and South Korea make up a big chunk:


Source: Statista

Bearing in mind this data is from 2019, things may have changed.

Of the two, China and South Korea may be better placed than Japan in terms of reopening their economies.

South Korea has vaccinated around 6.6% of its population and China has vaccinated north of 12.2% of its population — these are just rough figures.

Japan on the other hand is the laggard here, with around 2.6% vaccinated.

Should vaccine rollouts accelerate in these countries then it could drag up demand for LNG as their economies get back on track. In turn aiding the outlook for WPL shares and helping it snap its downtrend.

There are a lot of dynamics at play, not least of which is a potential value pivot due to rising bond yields.

It’s worth noting that it has a significant revenue base of over $1 billion as of their most recent quarterly update.

It also has a trailing 12 month (TTM) price to revenue of 4.13 at the moment, according to TradingView.

In small-cap land that could be viewed as a bargain if there were significant growth prospects.

But this is a fossil fuel giant that needs to be looked at from a different lens.

If you are looking to learn more about value stocks and how to pick them, be sure to check out this in-depth report which features excerpts from Greg Canavan’s book.

He’s the editor of The Rum Rebellion and brings significant experience to the table, so well worth a read.


Lachlann Tierney,
For The Rum Rebellion

Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

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