Woodside Petroleum Ltd (ASX: WPL) will pay its $1.27 dividend to investors today and has seen its share price climb 16% since the start of the year – but is it the best value in the Oil & Gas sector?
The case for Woodside
Woodside is Australia's largest operator of oil and gas production with a market cap of $33.2 billion and recently reported full-year revenue of $5.24 billion and net profit after tax (NPAT) of $1.364 billion.
The company's free cash flow rose 83% on 2017 figures to $1.524 billion and looks set to benefit from its SNE joint venture (JV) in Senegal's first offshore oil development in the coming 6-12 months. Rising global oil prices and sustained east coast gas prices have boosted Woodside's share price in the early part of 2019 and the technical environment remains supportive for the Oil & Gas sector as a whole.
Despite its status as a leader in the energy sector, Woodside's share price has remained largely unchanged over the last 10 years and this is reflected in its 3.82% dividend yield, franked to 100% as it returns more capital to shareholders.
What are the alternatives?
Woodside is facing some stiff competition from the likes of Santos Limited (ASX: STO) and Beach Energy Ltd (ASX: BPT) within the S&P/ASX200 Index (ASX: XJO).
The Santos share price has soared 34% year-to-date while Beach has performed even better as its share price has rocketed 62% to be among the top gainers within the ASX.
Santos and Beach recently announced a JV with Key Petroleum Ltd (ASX: KEY) which will provide for more gas transportation and processing by the two gas giants from Key's Tanbar Gas Project.
In its half-year results, Beach doubled its underlying net profit after tax (NPAT) and the company's $2.09 valuation has been approaching its record high of $2.26 per share in recent weeks.
Weighing up the options
I think Oil & Gas sector exposure could be a good diversification move as global economic growth slows while oil and gas prices remain elevated due to supply shocks.
Woodside's 3.82% dividend yield compares favourably to that of Santos (1.89%) and Beach (0.93%) although its $33.2 billion market cap also dwarfs its competitors' $14.79 billion and $4.76 billion, respectively.
The oil and gas giant's ~17x P/E ratio is higher than that of Beach (~12x) and comparable to Santos (~17x) with arguably lower growth prospects given its more mature operating profile. On balance, I'd say that Woodside doesn't offer the value at its current $35.45 per share given other growth options on the market.
If you're not interested in jumping into the Oil & Gas sector, these top growth shares could be in the buy zone for growth-seeking Fools.
