3 things every investor must know before buying Woodside Petroleum Limited

Woodside Petroleum Limited  (ASX: WPL) is one of the largest ASX listed energy producers and is becoming increasingly known for its fantastic dividend yield.

As world share market volatility grows, Woodside stands out as a company to consider buying for its consistent cash flows and steady dividend.

There is more to Woodside than just its juicy dividend however and there are three things every investor must know about the company before buying:

1. Production tracking up

Woodside’s absence of large growth projects hasn’t stopped it from increasing production strongly for the second quarter of 2014. Production was up 17.5% over the same period in 2013, while sales revenue was up almost 25%.

The growth was driven by more reliable production from the company’s flagship Pluto LNG plant as well as the re-start of the Vincent floating production and storage vessel.

2. Rising future energy prices

Despite the recent fall back in the immediate spot–price for oil, Reuters reports that the price of oil futures are actually rising as a result of geo-political tensions.

The main driver is current sanctions against Russia which apply to the sale and supply of drilling equipment to the country’s oil producers. These sanctions may push buyers to other oil producing regions, however current violence in Iraq and Libya, with ongoing issues in Iran means there are fewer options.

3. Outlook

Woodside is well positioned to leverage the demand for LNG in the Asia Pacific and the company is likely to do particularly well from the third quarter onwards. This is because the company will achieve a higher negotiated price on 75% of total sales from Pluto LNG.

With Woodside withdrawing from the Leviathan Joint Venture the company will refocus on its options to grow its portfolio from exploration and other commercial transactions like the company’s farm-in offers in Morocco and Tanzania with Beach Energy Limited (ASX: BPT).

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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