How Energy Resources Demand Is Positioning ASX: WPL To Leap Ahead?

  • Apr 20, 2019 AEST
  • Team Kalkine
How Energy Resources Demand Is Positioning ASX: WPL To Leap Ahead?

The energy sector is noticing a considerable demand amid greater consumption in industrial, commercial, household uses of the energy to meet the daily needs. The sector acts as a backbone for any economy and is dependent on renewable energy resources and non-renewable energy resources. The non-renewable resources are marking a rise in trend and new investments; however, the scalability of the renewable energy is not so high, and countries are burning extensive capital towards the renewable energy projects to shift towards a low emission economy.

In the meantime, the non-renewable energy resources catch the major chunk of the energy sector, and crude oil and natural gas make up a significant portion of it.

Crude oil prices are on a surge amid supply gap in the global market; the prices are trading well above $70 and is currently hovering around approx. $72 mark. The production cut by OPEC and supply disruption caused by U.S. sanctions on oil exporting countries along with the civil war in Libya, which hampered the crude exports, catapulted the prices in the international market.

Many oil explorer and producers are positioning themselves to take advantage of high oil prices in the market to strengthen their balance sheet. A price above $60 can provide a company with an advantage of the commodity scenario in terms of high realized sales proceeds.

Companies with significant projects and high exploration might produce more oil and natural gas to take advantage of prices in the global market.

Woodside Petroleum Limited (ASX: WPL): The company operates various natural gas and oil production and exploration projects in Australia.

Key Business activities:

The company commissioned the Pluto pipeline gas facility in the year 2018 and achieved record LNG production rates at the Pluto LNG project. Woodside also delivered 5,000th LNG cargo from its flagship NWS project in the year 2018.

Woodside delivered a near-term growth through its Wheatstone prospect, Greater Western Flank phase 2, and Greater Enfield prospect.

The production exceeded in Wheatstone prospect from LNG trains 1 and 2 in the year 2018 and Woodside also completed the construction of a domestic gas plant in the last quarter of the year 2018.

The company commenced production from Greater Western Flank Phase 2 in October 2018, which was half a year ahead of schedule with $630 million under budget.

Woodside completed 83% of Greater Enfield project and is targeting first oil production in the middle of the year 2019, which is estimated to contribute 10MMboe in 2020 by the company.

The company aims to reach near the production level of 100MMboe annually in 2020. Woodside significantly increased its long-term LNG contracts in 2018 as compared to the previous year; however, the company signed 53% of the long-term sales contract from unsanctioned projects.

Financial Strength:

The company reported an NPAT of $1,364m in the year 2018, which was 28% as compared to the previous year amid increased sales revenue due to higher realised prices and increased sales volume in the year 2018. The company reported a 4% revenue growth in the first quarter of the year 2019.

The Free cash flow with the company stood at $1,524m at the end of the year 2018, which was up by 83% as compared to the previous year. The company distributed a total dividend of 144 cents per share in the year 2018, which was 47% up, as compared to the dividend in the year 2017. The company’s annual report of 2018 suggests all the above figures.

2019 Guidance:

Woodside kept the production guidance of LPG in the range of 70-73MMboe, with 13-16MMboe in liquids and kept the total production guidance of 88-94MMboe for the year 2019.

In a nutshell, the company operates significant production projects, and its financial metrics are on track. Investors may monitor if this place the company in the position to leap forward and gain profits from high energy demand and energy resources prices.

WPL closed the market trading at A$36.650, up 0.992% (As on 18 April 2019). The stock has offered a YTD return of 15.78%>

Woodside on Charts:

Source: Thomson Reuters: WPL Daily Chart

Following the development on a daily chart, it can be seen that the share prices of the company are trading above the moving average of both medium-term and short-term. The moving averages taking here are an exponential moving average so that the average takes into account the price actions quickly. The 7-days exponential moving average is at A$35.442, and 20-days exponential moving average is at A$35.215. The prices are currently trading above both the averages.

The RSI (14) is at 55.725, which is above its mean of 50, and the Chart recently represented a golden cross over at on 11th April 2019.


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