Woodside Petroleum Limited (ASX: WPL) announced the second largest profit in the company's history yesterday at US$1.75 billion. However this doesn't reveal the full story. Here are four important points investors need to know about Woodside's result:
1. Production was up, but revenue was down
An increase in natural gas production from Pluto LNG was not enough to offset the loss in oil revenues from declining oil fields and the off-line Vincent production vessel. The change in production mix caused a US$540 million decline in revenue for the year despite record production.
Natural gas made up 79% of Woodside's production (up from 69% in 2012), but accounted for just 66% of revenue. Inversely, the higher yielding oil made up 10% of production (down from 20% in 2012) and 17% of revenue.
2. Dividends for the year nearly doubled
The strong cash flows and a sharp 52% decline in capital expenditure means Woodside will almost double its full-year dividend. The total payment of US$2.49 per share is up from US$1.30 in 2012 and at the current exchange rate gives Australian investors an equivalent dividend yield of 7.23%.
3. Any development of the Browse Basin is still a long way off
The already much delayed Browse Basin project is expected to keep inching forward in 2014. After deciding to proceed with a floating LNG option (FLNG), the joint venture will be in position to "consider commencing" the front-end engineering and design (FEED) phase in 2014, with no final decision being made until the second half of 2015.
4. Outlook for 2014
Woodside are targeting a production range of 86 to 93 million barrels of oil equivalent (mmboe) for 2014. This will likely be an increase on 2013's record 87 mmobe. Around 39% of this will come from Pluto LNG, while 23% will come from North West Shelf (NWS) LNG.
Foolish takeaway
Woodside's result paints the picture of a company which has shifted into a mature phase of growth, sucking in strong cash flows and paying it out to shareholders. This is likely to remain the case over the next year or two until the company's next two big projects – Browse LNG and the Leviathan gas field – get underway.
