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Woodside raising $2.5b for LNG expansion

Woodside Petroleum is raising $2.5 billion from shareholders to fund its purchase of an additional stake in Western Australia’s Scarborough gas field and expansion of other gas projects.

Woodside will take majority control of the gas field, located off the coast of WA about 220 kilometres north west of Exmouth, by acquiring ExxonMobil’s 50 per cent stake for $US444 million, plus a future payment of $US300 million contingent on a final investment decision to develop the field. The energy giant already holds a 25 per cent stake in Scarborough after snapping up half of BHP Billiton’s interest in 2016.

The deal was announced as Woodside reported an 18 per cent increase in its full year net profit to $US1.02 billion ($A1.3 billion), due to improved market conditions and higher oil prices. Revenue for the year to December 31 declined 4.1 per cent as volumes dropped, and Woodside’s final dividend remains unchanged. Chief executive Peter Coleman said the Scarborough deal would allow the company to develop new supply that is likely to materially add value.

“The acquisition of the additional interest in Scarborough provides greater alignment, control and certainty over a low-cost, high value opportunity ahead of a global LNG supply gap,” he said. The deal takes Woodside closer to a plan to pipe gas from the Scarborough field to its Pluto liquefied natural gas plant at the onshore Burrup Hub in WA.

“Our Burrup Hub concept is advanced by our announcement today,” Mr Coleman said. Woodside said it will raise $2.5 billion to help fund the acquisition and early development of Scarborough by offering about 94 million new shares in an entitlement offer to shareholders. The offer will also provide funding for a second production unit at the Pluto LNG plant near Karratha, progress on its plan to pipe gas from the Browse field to the North West Shelf LNG plant in WA, and first-stage development of the SNE oilfield in Senegal. RBC Capital Markets analyst Ben Wilson said the large equity raising appeared to be designed to head off future requirements for funds, but questioned the nature of the Scarborough acquisition. “We have remaining questions as to why Woodside is deepening its portfolio of longer-dated undeveloped contingent resources when a liquids acquisition would better balance its portfolio,” he said.

The institutional portion of the equity raising is expected to be completed on Thursday, and Woodside shares are expected to remain in a trading halt until February 19.


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