Woodside Petroleum Ltd. – Value Analysis (ASX:WPL) : October 4, 2017

Capitalcube gives Woodside Petroleum Ltd. a score of 75.

Our analysis is based on comparing Woodside Petroleum Ltd. with the following peers – Santos Limited, Central Petroleum Limited, Oil Search Limited and Beach Energy Limited (STO-AU, CTP-AU, OSH-AU and BPT-AU).

Investment Outlook

Woodside Petroleum Ltd. has a fundamental score of 75 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It’s current Price/Book of 1.19 is about median in its peer group.
  • WPL-AU‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • WPL-AU has relatively high profit margins while operating with median asset turns.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • WPL-AU‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While WPL-AU‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • WPL-AU has additional debt capacity.

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Leverage & Liquidity

WPL-AU has additional debt capacity.

  • With debt at a reasonable 20.28% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 35.91%), and a well-cushioned interest coverage level of 11.70x, WPL-AU has the capacity to borrow some more.
  • All 4 peers for the company have an outstanding debt balance.

WPL-AU has moved to a relatively high liquidity from an Quick & Able profile at the prior year-end.

  • WPL-AU‘s interest coverage has increased 3.48 points from last year’s low but is still below its four-year average interest coverage of 17.75.
  • Though its interest coverage increased to 11.70x from 8.22x (in 2015), its peer median remained relatively stable during this period at 2.49.
  • Interest coverage rose 3.27 points relative to peers. It is also above the 2.50x coverage benchmark unlike the peer median.
  • WPL-AU‘s debt-EV is its highest over the last four years and compares to a low of 10.03% in 2014.
  • Though its debt-EV has remained relatively stable at 20.28% compared to 2015, its peer median has decreased to 35.91% from 39.79% during this period.
  • Relative to peers, debt-EV rose 4.27 percentage points. Unlike the peer median, it is also below the 25% leverage benchmark.

Access the detailed analysis for Woodside Petroleum Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Santos Limited 65.71 2.33 2.49 14.39
Central Petroleum Limited 60.79 1.06 -1.48 -5.15
Oil Search Limited 35.91 2.11 2.43 13.43
Beach Energy Limited 16.88 4.14 14.4 227.29
Woodside Petroleum Ltd 20.28 0.99 11.7 45.54
Peer Median 35.91 2.11 2.49 14.39
Best In Class 16.88 4.14 14.4 227.29

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Company Profile

Woodside Petroleum Ltd. engages in the exploration, evaluation, development, and production of hydrocarbon and oil and gas properties. It operates through the following segments: North West Shelf, Pluto, Australia Oil, Browse, Wheatstone, and Others. The North West segment engages in the exploration, evaluation, development, production and sale of liquefied natural gas, pipeline natural gas, condensate, liquefied petroleum gas and crude oil from the North West Shelf ventures. The Pluto segment engages in the exploration, evaluation and development of liquefied natural gas in assigned permit areas. The Australia Oil segment involves in the exploration, evaluation, development, production and sale of crude oil, condensate and liquefied petroleum gas and pipeline natural gas in assigned permit areas including Laminaria, Mutineer-Exeter and Enfield, Vincent, Otway and Stybarrow ventures. The Browse segment involves in the exploration, evaluation and development of liquefied natural gas in assigned permit areas. The Wheatstone segment involves the exploration, evaluation, and development of liquefied natural gas and condensate. The Other segment comprises the activities undertaken by exploration, international and Sunrise Business Units. The company was founded on July 26, 1954 and is headquartered in Perth, Australia.


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