PERTH - Woodside Petroleum Ltd. aims to finalize a US$1.2 billion deal to buy a 30% stake in a big natural gas field in the Mediterranean Sea by June, after talks with Israel were held up by a general election.
Woodside Chief Executive Peter Coleman said he hadn't been able to meet with Israeli lawmakers for some time to discuss the stake purchase in the Leviathan gas field because of the election campaign in January and subsequent efforts to form a new coalition government.
Leviathan, which contains an estimated 18 trillion cubic feet of natural gas, is the world's largest deepwater gas find in a decade. Its discovery with other large fields off Israel's coast in recent years has potentially set up Israel as an exporter of energy.
Woodside agreed a deal to acquire the stake in Leviathan in December as it stepped up a search for overseas assets that could increase its production within the next five years. Several setbacks in Australia have dented its near-term prospects, including a decision to shelve plans for the Browse liquefied natural gas facility onshore Western Australia and a shortage of gas to underpin an expansion of its US$15 billion Pluto project.
Woodside's partners in the joint venture – Noble Energy Inc., Delek Group Ltd., Avner Oil Exploration LP and Ratio Oil Exploration (1992) LP – had expected the deal for the Leviathan stake to be finalized by February.
Despite the delays due to the election, Mr. Coleman said Woodside aims to complete the Leviathan deal before the end of the first half of the current calendar year.
However, investors in Leviathan are still seeking clarity on Israel's policy toward gas exports.
Earlier this month, Noble Energy Chief Executive Charles Davidson said production from Leviathan won't begin until Israel sets out export rules dictating how much gas can be sold abroad. A 2012 government commission issued several policy recommendations, including an export quota, that the government has yet to adopt. Some environmentalists and local politicians have opposed the recommendations.
"Export options are now being mooted in Israel, potentially pipeline options as well as liquefied natural gas options and we need to consider those," Mr. Coleman told reporters following Woodside's annual meeting of shareholders.
In an unusual move for an international oil company, Woodside said Tuesday it will distribute the vast majority of its profits to shareholders in dividends rather than invest it in exploring for new resources or acquiring oil and natural gas fields. That prompted analysts at Macquarie to say Woodside is no longer a growth company, but a high-yield investment play similar to Australian banks.
Mr. Coleman said Woodside retains "headroom" to pursue acquisitions even though it will return more than US$500 million to shareholders this year through a special dividend.
He rejected a suggestion that Woodside has prioritized dividends at the expense of big natural gas projects, such as Browse LNG, which has been shelved for at least two years on the grounds that a new onshore plant at James Price Point in Western Australia wasn't commercial.
"We are still a growth company," he said, pointing to Woodside's continued focus on exploration and development activities in Australia and overseas.
"Those growth projects are still there--they haven't gone away," he said, adding that the only thing that has changed is the timing of developments and the respective capital requirements.
Mr. Coleman said Woodside has some sales contracts from the Pluto and North West Shelf ventures that it operates in Australia coming up for renewal.
But he didn't see any major softening in LNG demand as buyers anticipate future supply increases from North America and East Africa.
Demand for LNG at the moment is "very strong, particularly for spot cargoes and we expect that demand to maintain that strength over the next three or four years," he said.
Copyright (c) 2012 Dow Jones & Company, Inc.
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