Start of 2019 so time to have a bit of a review of everything. Somewhat fitting to post it under Scarborough though since this is the big growth project for Woodside.
Context: (2017) US$
- Pluto Train 1: $803m deprecation (untaxed) + $1,010m pre tax profit for WPL's 90% stake ~65% of Woodside's operating cash flow (which is why I'm excited about the prospect of a second train at Pluto)
- Wheatstone - came online so late it didn't contribute to profits.
- GE spending was ramping up
- GWF2 spend was ongoing
- Questions on alignment for Scarborough and Browse
- No M&A
- Operating cash flow of $2.4B, free cash flow of $832m, difference is investment expenditure.
2018: US$
- Unsure on Pluto production yet - should come out in Feb. Expecting higher profitability due to oil price (LNG contracts priced on lag to oil price), Spot prices have also been very good in Q4 - higher than 2017.
- Scarborough / Pluto train 2 coming at us - considering how much train one contributes to WPL's bottom line - a second train is huge. ~31mmboe/yr (LNG only, 75% - WPL share), 925mmboe = 30 years of production - will be less due to Dom gas / inter connector to NWS, likely back-filling Pluto train 1 etc. But also have Jupiter / Thebe as future tiebacks. (Feb purchase from Exxon added ~600mmboe to WPL's 2C - exact details should be appearing in annual report in Feb)
- Wheatstone: Expecting a contribution of $250-300m to bottom line. Eventually (hopefully 2019) should ramp up to ~$400 to bottom line at ~13mmboe/yr oil price dependant. (WPL share of 2P 270mmboe ~21 years of production assuming no decline)
- SNE phase 1 FEED: WPL share of production should be around 11.5mmboe, significantly higher OPEX than WPL's LNG plus lease costs of FPSO so will generate less cash per BOE under $70 oil (LNG also sells at a premium to oil below ~$55/bbl). Phase one 2P expected to be around 73mmboe (numbers assume Senegal Government takes up additional 8%) (6.3 years of production assuming no decline - plateau most likely will hit around 2-4 year mark so phase two spend coming up quickly post RFSU.
- GE spend continuing
- GWF2 completed
- Myanmar possible commercial volumes.
- I'm expecting operating cash flow of around $2.8B, free cash flow of $800m, difference is investment expenditure including Scarborough acquisition.
2019:
- GE coming online 2H (2P 41mmboe) ~8.8mmboe/yr production rate.
- Lower CapEX as GE comes online, Wheatstone Dom Gas commissioned, FID's expected towards year end. Will be the lowest CapEX year since WPL bought Wheatstone.
- Wheatstone: first full year from two operational trains + dom gas expected in Q1. Effort will be going into reducing OPEX towards the sub $4/bbl range (similar to NWS and Pluto)
- Will be a big free cash flow year with lower CapEX / investment expenditure expecting $0.8 to $1B (2018 was ~$1.6B+ Scarborough M&A), contribution from GE / big year at Whetstone with two trains etc. increasing cash flow.
- I'm expecting operating cash flow of around $3B, free cash flow of $2B, difference is investment expenditure. Leaves room for either M&A or hopefully bring some SNE spend forward. Subject to oil price etc. Note: as reasonable chunk of free cash flow is in the deprecation bucket, we may see dividends exceed NPAT i.e. a payout of additional franking credits.
DYOR etc. but at a US$ market cap of near $20B a lot of WPL's growth doesn't feel like it's priced in.
