Woodside Petroleum insists it is on a strong growth trajectory and not just interested in handing out cash after shelving its $45 billion Browse project.
Chief executive Peter Coleman says the company’s $500 million special dividend is the best way to reward patient shareholders as it focuses on meeting its growth commitments.
“Those growth projects are still there,” Mr Coleman told reporters in Perth.
“They haven’t gone away.”
Woodside has not identified any significant short to medium-term growth options after putting its controversial Browse gas plant in Western Australia on ice and ruling out a near-term expansion of its flagship Pluto liquefied natural gas (LNG) project.
Mr Coleman said Woodside was able to keep shareholders interested through its dividend and forecast growth.
Royal Dutch Shell had not indicated that it would divest its stake in Woodside following Tuesday’s announcement of a US 63 cent special dividend, he said.
The oil and gas giant is currently renegotiating LNG contracts for its Pluto and North West Shelf projects and is examining costs ahead of smaller projects coming online at the North West Shelf over the next few years.
Woodside expects strong demand for LNG to be maintained for the next three or four years.
Mr Coleman says the resources sector is going through a natural correction after a long commodities cycle.
He also revealed that negotiations to take a 30 per cent stake in the Leviathan gas field off Israel were on hold due to national elections in that nation.
Closer to home, Woodside will propose a work program with its joint venture partners for the remaining 20 months of the Browse retention leases, giving it a tight deadline to choose between piping gas onshore or building a floating LNG (FLNG) processing plant.
Mr Coleman said the company would try to make early decisions about its three development options in relation to Browse.
He also dismissed concerns about FLNG being an unproven technology, saying it was a new construction technique but the technology was well known.
While the company was committed to developing the Browse offshore gas resource, significant cost savings would be necessary to pursue an FLNG option, he said.
Deutsche Bank analysis, using Shell’s Prelude FLNG project as a base, showed a floating option would be around 25 per cent cheaper than the James Price Point onshore option, which has cost $1.5 billion to date.
“The floating option is the leading contender,” Deutsche Bank analyst John Hirjee said.
However, he said there had been no precedent for FLNG.
RBC Capital markets analyst Andrew Williams said that by announcing a special dividend Woodside had signalled it had no tangible short-term growth options.
Woodside shares closed 78 cents, or 2.05 per cent, higher at $38.74.
