Back in December, I wrote that Woodside Petroleum Limited (ASX: WPL) had made a US$2.75 billion offer for a number of Apache Corporation's LNG and oil producing assets.
However, the Australian Competition and Consumer Commission (ACCC) scrutiny raised uncertainty over whether the project would go ahead.
Six weeks later the acquisition has been given the all-clear, with Woodside set to finalise the deal by the end of March this year.
Here's what you need to know:
- ACCC found that Woodside would continue to face strong competition in LNG sales in Western Australia, from companies like Chevron, Santos Ltd (ASX: STO), and Apache, which even after the sale has a larger gas business in WA than Woodside does
- Balnaves and Kitimat projects will not supply product to Australia and thus were exempt from this analysis
- However, the market raised concerns about further consolidation by major players and the ACCC has taken note
Of greater interest to Woodside shareholders are the expected increases in production, which are expected to add 3-4 Million barrels of oil equivalent (Mmboe), assuming the transaction closes by March 31.
This is in addition to 84-91Mmboe output forecast for 2015.
It is unclear yet what the cost of production or the total increase to reserves will be, with Woodside flagging a market update once the transaction closes.
However with a sizeable increase to exploration territory (over 300,000 acres) and producing wells that immediately deliver cashflow, the acquisition looks to be a sound long-term asset.
Woodside also recently raised US$1 billion in bonds, which will help maintain the company's strong cash position going forward, and could also lead to an increase in near-term exploration work.
Although the oil and gas markets have taken a nasty shock recently, with Woodside's strong financials and portfolio of long-term projects, it's in as good a position as virtually any global company to weather the storm.
(You can find more info on Woodside's Apache acquisition as well as an update on the Browse Floating LNG project here).
