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Woodside Petroleum share price on watch after COVID-19 update

The Woodside Petroleum Limited (ASX: WPL) share price will be on watch on Friday after the release of a market update.

What did Woodside announce?

This morning the company noted that the current uncertain global investment environment arising from the spread of COVID-19, combined with an oversupply of crude oil and LNG, has led to a significant decline in prices.

Management acknowledges that this sudden change in market conditions requires swift and decisive action.

As a result, the company is taking a prudent approach to cash flow management and will take appropriate actions to ensure its credit rating remains robust.

What action is the company taking?

Woodside is making changes to its 2020 work plan, resulting in a ~50% reduction in forecast 2020 total expenditure. It has also reviewed all non-committed activities supporting growth activities, resulting in a ~60% reduction in its 2020 guided investment expenditure.

The company is deferring its targeted final investment decisions for Scarborough, Pluto Train 2, and Browse. However, it will continue to progress capital investments in the Sangomar Field Development Phase 1 (Sangomar), Pyxis Hub, and Julimar-Brunello Phase 2.

One thing that is staying the same is its production. Management advised that its 2020 production guidance remains unchanged at 97 MMboe to 103 MMboe.

What now?

Management expects these actions to bolster the financial resilience it has developed in recent years in preparation for growth and position it to maximise opportunities after the simultaneous impact of demand and supply shocks passes.

It notes that as of February, it had cash on hand of $4.9 billion, total liquidity of $7.9 billion, and low gearing of 13.8%.

Woodside CEO Peter Coleman said: “These are extraordinary times, that no one could have foreseen, but Woodside enters this period of significant uncertainty with one of the stronger balance sheets in our industry and world-class, low-cost producing assets, which are resilient to commodity price fluctuations.”

“Our disciplined approach to cash flow and debt management has positioned us to respond quickly and decisively. The measures we are implementing will preserve cash during these challenging months and ensure that in the longer term we can successfully execute the growth strategy we have in place,” he concluded.

Elsewhere, the Beach Energy Ltd (ASX: BPT) share price will be on watch today after the release of an update of its own.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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