Woodside Petroleum Limited (ASX: WPL) has successfully completed the purchase of assets held by the Apache Corporation for US$2.75 billion. The assets include the purchase of Apache's 13% stake in Chevron's Western Australia Wheatsone LNG project, which is scheduled to start in 2016.
The deal means an extra 260 million barrels of oil equivalent (mmboe) has been added to Woodside's total proved and probable (2P) reserves, an increase of 19%. Woodside now boasts a combined 1,599.4 mmboe of 2P reserves to 31 December 2014, more than Santos Ltd's (ASX: STO) 2P reserves of 1,245 mmboe.
What does this mean for investors?
The acquisition tops up Woodside's annual production forecasts for the 2015 financial year (FY15) by 2-3 mmboe as well as increasing the company's pool of reserves. Full-year FY15 production is now expected to be up to 94 mmboe; just below FY14's record production of 95.1 mmboe.
The addition is an important stop-gap for Woodside's short-term growth plans. It adds 2.7 years to the company's reserve production life and helps to plug the gap until Woodside's next major project can be finalised; the mammoth Browse floating LNG project.
The Browse joint venture's Final Investment Decision is scheduled for next year, and if it proceeds will help to meet a growing demand for LNG, which some analysts have suggested could start to exceed supply by 2022.
Should you buy?
Woodside Petroleum shares do not look cheap at the moment on either a price-to-book ratio or a price-to-earnings ratio basis, but the additional reserves will be a relief to investors enjoying the company's current status as a generous dividend payer.
