Woodside shareholders could be in for a bonanza after the company notched up record annual production and sales revenue of almost $6 billion.
Irrespective of whether Woodside pushes the button on a $1.2 billion investment in Israel, shareholders are anticipating a substantial return of cash in the form of a special dividend or a share buyback.
Analysts say Australia’s largest pure play petroleum producer is under pressure to begin deploying some of its massive cash flows ahead of the release of its 2013 full year earnings result next month.
Investors pushed Woodside shares more than two per cent higher on Thursday as the company finished the year strongly, lifting sales revenue in the December quarter by more than 23 per cent from the previous quarter to $1.65 billion.
The share price strength came despite the company reporting a fall in annual sales revenue as it flagged up to $400 million in writedowns on its WA oil and gas fields.
However, the impairment would be offset by a benefit of up to $250 million on the petroleum resource rent tax, through deductions carried forward.
Woodside reported sales revenue for full year 2013 was $5.8 billion, down 7.2 per cent on the previous year due to lower average realised prices.
The company achieved record oil and gas production and maintained its 2014 full year production guidance in the target range of 86 to 93 million barrels of oil equivalent (mmboe).
Meanwhile annual production in 2013 was up 2.5 per cent on 2012 and sales were up 2.3 per cent.
Woodside’s Pluto project has become its biggest producer.
State One analyst Peter Kopetz said Woodside was making a lot of money, but its balance sheet could become bloated if the Israel deal falls over.
“They’re in a spot right now where they’re generating a lot of cash and they’ve got no projects to put them into – they need to do something about it otherwise they’re going to have a lazy balance sheet,” Mr Kopetz said.
Woodside is waiting for the Israeli government to finalise its tax policy for gas export projects before making a final investment decision on the Leviathan project in the first half of 2014.
If Leviathan doesn’t go ahead the company is likely to put its cash into organic growth and hand more funds back to shareholders, Mr Kopetz said.
“The shareholders should be happy either way,” Mr Kopetz said.
“It could be a bonanza.”
Shares in the company were 91 cents, or 2.4 per cent, higher at $38.53 at 1452 AEDT.
Woodside will release its full year earnings result on February 19.
