The Woodside Petroleum Limited (ASX: WPL) share price is sinking today despite the company announcing a supply agreement for liquefied natural gas (LNG).
At the time of writing, the Woodside share price is down 5.45% to $23.96.
Let's take a closer look at what Woodside announced.
LNG supply agreement
Woodside advised it has entered a sale and purchase agreement with RWE Supply & Trading GmbH (RWE). The contract will tap into Woodside's global energy portfolio to deliver roughly 0.84 tonnes per annum of LNG.
This deal extends the working relationship between both parties, developed through mid-term and spot business deals in Asia-Pacific and the Atlantic basin.
RWE will use the supply of LNG to service the strong demand from its customer base.
The contract will kick off in 2025 and last for a period of 7 years. Woodside said the agreement was not subject to a final investment decision (FID) on any of its projects.
Today's release also noted that Woodside and RWE signed a memorandum of understanding (MOU) in October last year. The document is based on pursuing mutually beneficial hydrogen-related opportunities.
Hydrogen is expected to become increasingly adopted in future as it is a carbon-neutral fuel. Currently, RWE is advancing the development of about 30 hydrogen projects, mostly situated in Europe.
What did management say?
Commenting on the deal, Woodside executive vice president Meg O'Neill said:
Customers are increasingly seeking to secure new energy supplies in a timeframe which supports the development of our Scarborough offshore gas resource and the expansion of the Pluto facility with the addition of a second LNG production train.
This agreement with RWE is another demonstration of the momentum we are gathering ahead of our targeted FID on Scarborough and Pluto Train 2 in the second half of this year. The SPA also provides the opportunity for Woodside and RWE to explore the potential for carbon-neutral LNG production and trading.
RWE chief commercial officer Andree Stracke added:
RWE is delighted to enter into a longer-term LNG supply agreement with Woodside which further reinforces the strong relationship we have developed together over the last years. The volumes will continue to enable us to deliver effective LNG solutions to our customers and will provide a platform to further advance our existing business in Asia.
Woodside share price performance
The Woodside share price is down 27% over the last 12 months but up almost 7% year-to-date. The company's shares dived to $14.93 when COVID-19 put the global economy at a standstill. However, its shares have gradually rebounded, especially of late.
Based on the current Woodside share price, the company has a market capitalisation of roughly $23.3 billion.
