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Bloomberg: Woodside’s Browse LNG May Add A$12 a Share, UBS Says (Update1)

By Angela Macdonald-Smith

Sept. 7 (Bloomberg) — Woodside Petroleum Ltd.’s proposed Browse liquefied natural gas project, should it proceed, may be worth as much as A$12 a share for the Australian oil and gas producer, more than a third of the current valuation, UBS AG said.

The Western Australian project, to which PetroChina Co. signed up yesterday as the first customer, contributed to UBS increasing its 12-month share price forecast for Perth-based Woodside by 3.8 percent to A$52.48 in a Sept. 6 report. It has a current value of A$30.74 on the stock.

PetroChina, Asia’s largest oil company by market value, yesterday agreed to buy 2 million to 3 million metric tons a year of LNG over 15-20 years from Woodside’s 47 percent-owned Browse project, set to tap gas fields off the northwest coast. Browse is Woodside’s largest undeveloped gas asset, with about 20 trillion cubic feet of gas and 311 million barrels of condensates.

“In our view, this is a very positive preliminary agreement for Woodside with a leading Chinese energy company,” Melbourne- based UBS analyst Gordon Ramsay said in the report. “We also think Woodside would not have signed this agreement unless it received close to current market pricing for the LNG.”

Woodside, Australia’s second-biggest oil and gas producer, rose as much as 67 cents, or 1.5 percent, to A$46.77 on the Australian Stock Exchange. It was at A$46.60 at 11:49 a.m. in Sydney.

Onshore Plant

UBS assumes the Browse project is initially developed using a 7-million-tons a year onshore plant starting production in 2014, adding a second unit later to double capacity. It estimates PetroChina agreed to pay $7-$9 per million British thermal units for Browse gas, compared with existing LNG pricing in Asia of about $8-$10.

Woodside’s share of the project may be worth as much as A$8.13 billion ($6.7 billion), or between A$9 and A$11.93 a share, it said.

BP Plc has about a 17 percent stake in Browse, as does Chevron Corp., while BHP Billiton Ltd. owns 9.7 percent and Woodside’s 34 percent shareholder Royal Dutch Shell Plc has 9.1 percent.

Credit Suisse Group in a report today increased its valuation of Woodside by 3 percent to A$37.48 a share due to the PetroChina accord. It assumes Woodside gets an average price of about $10 per million Btu for Browse LNG, which Credit Suisse said may be in line with the price PetroChina agreed to pay earlier this week with Shell for LNG from the Gorgon project, also in Western Australia.

“PetroChina’s recent activity, securing two separate LNG conditional supply agreements, provides further evidence China is now willing to meet market LNG prices,” Merrill Lynch & Co. said in a separate Sept. 6 report.

Merrill also assumes PetroChina agreed to pay a similar price to the $10 price speculated for the PetroChina/Shell accord, which is more than triple the current import price of Australian LNG into China.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected]

Last Updated: September 6, 2007 21:53 EDT

http://www.bloomberg.com/apps/news?pid=20601081&sid=aI_InLy4EpuM&refer=australia

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