The stock picker’s guide to Woodside Petroleum Limited in 2014

What you need to know to get rich from Woodside Petroleum in 2014.

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Since the completion of Pluto LNG in 2012, Woodside Petroleum Limited (ASX: WPL) has delivered investors a steady stream of cash flows supported by growing LNG production. With global demand for cleaner energy sources growing strongly, 2014 could be a big year for the company.

A strong performer with good long-term prospects, here are some key points to be aware of for the year ahead.

Expect cash, lots of cash!

Woodside’s revenue for the full 2013 year was close to $6 billion, yet capital expenditure has been muted since 2012, when Pluto LNG was completed. Similar to the situation faced by fellow energy producer Santos Limited (ASX: STO), the result is likely to be ample free cash flow for the next year, which will help deliver a reliable dividend and a possible repeat of 2013’s bonus dividend payment.

The dividend is set in U.S. dollars making it extra enticing. If the U.S. economy continues to strengthen and push up the U.S. dollar, it will mean higher yields for Australian investors.

Exploration investment

Exploration will make up a big part of Woodside’s long-term growth strategy in 2014. New exploration permits granted in conjunction with New Zealand Oil & Gas Ltd (ASX: NZO), will see Woodside exploring two prospective basins in New Zealand, while progression with exploration in Ireland’s Porcupine Basin will also be on the cards.

This year investors should also get an update on Woodside’s long-standing Browse Basin project and Israel’s Leviathan gas field, both of which have been shrouded in uncertainty but offer significant growth potential.

More shares on the market

Key shareholder Royal Dutch Shell plc (NYSE: RDS.A) is reported to be considering selling its 23% stake in Woodside, worth up to $7 billion. This will likely mean more shares on the market. One of the outcomes of this could be more buying interest from institutional investors, some of which have reportedly held back on buying in case Shell’s sell-down flooded the market and forced the share price down.

Foolish takeaway

In 2014 Woodside will see an increase in investor attention if positive operating conditions continue and the company elects to pay out an increased portion of its free cash. A positive final investment decision on the company’s Browse Basin and Israel projects will also help, and although risks remain, it appears Woodside could be in for a strong year in 2014.

Motley Fool contributor Regan Pearson doesn't own shares in any companies mentioned.

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