INTERVIEW: Woodside Value Surges, CNOOC Talk Doubtful
PERTH, Aug 11, 2005 (Dow Jones Commodities News via Comtex)
High energy prices and takeover speculation have proved to be a potent mix for Australia's Woodside Petroleum Ltd. (WPL.AU) over the past month.
Excited about widespread takeover talk involving China's CNOOC, investors have boosted Woodside's market value by around AS$3 billion to A$22.1 billion in that time.
Yet analysts regard the likelihood of CNOOC bidding for Australia's biggest independent oil and gas group as fanciful at best and "nonsensical" at worst.
The theory goes that energy hungry CNOOC - rebuffed in its US$19 billion tilt at U.S.-based Unocal Corp. (UCL) - will now turn its attention to Woodside, the operator of Australia's North West Shelf liquefied natural gas venture.
But Robin West, chairman of Washington, D.C.-based consultancy PFC Energy, believes that stalking Woodside is too risky for CNOOC.
"It is very unlikely that CNOOC is going to enter into an unfriendly, or competitive bidding situation again," said West, a strong critic of CNOOC's aggressive approach in the Unocal bidding war.
"They will do negotiated, friendly deals, if they do corporate takeovers at all," he told Dow Jones Newswires in an interview.
West also noted that a A$10 billion hostile bid for Woodside from long-term 34% shareholder Royal Dutch/Shell (RD) attracted fierce opposition in Australia, and was eventually rejected by Treasurer Peter Costello in 2001 on national interest grounds.
This means a CNOOC bid for Woodside is unlikely, West said, "unless Woodside wants to be taken over and unless Shell wants to participate."
"And the other important participant in all this is BHP Billiton (BHP)," he said, in a reference to BHP's status as a part-owner of the North West Shelf venture.
BHP - the world's biggest mining company by market value - looked at Woodside during the Shell takeover and has often been touted as a potential predator of the Perth-based company.
"Unless all the significant players are aligned I think it's unlikely that they (CNOOC) would undertake some kind of bid," West said.
Woodside Shares Go Orbital With Pluto Plans
Woodside's shares have soared 15% since the CNOOC speculation resurfaced a month ago, versus a 3.5% gain in Australia's broader share market.
Woodside shares closed up 3.2% Thursday at A$33.24.
Some of the recent gain is attributed to high energy prices alongside Woodside's aggressive plan to develop a A$5 billion (US$3.8 billion) LNG project at its Pluto field offshore Western Australia.
Woodside hopes to bring 100%-owned Pluto into production by late 2010, rubbing up against competing LNG projects, such as Chevron Corp.'s (CVX) A$11 billion Gorgon venture.
Woodside chief executive Don Voelte - the former Mobil executive who has pushed a strong growth platform since taking up the reins 18 months ago - said Pluto's development won't conflict with the North West Shelf, which recently approved its own A$2 billion expansion.
Nevertheless some analysts speculate that Woodside may poach one or more of the Shelf's long-term Japanese customers for Pluto when existing contracts expire in 2009.
Unveiling his ambitious Pluto strategy this week, Voelte declined an opportunity to squash the persistent CNOOC takeover talk.
Asked if he has spoken to CNOOC following its failed tilt at Unocal, Voelte told reporters, "No, I won't" make any comment about the speculation.
However, Voelte was much clearer on excluding CNOOC from Woodside's marketing plans for Pluto. He said the company is "not scheduling" Pluto for fast-growing China, which has already committed to take LNG from the North West Shelf starting next year.
CNOOC also has a small equity stake in the North West Shelf gas reserves as part of its deal to import LNG into Guangdong.
China's established relationships with the Shelf have helped fuel the talk of CNOOC's wider corporate interest in Woodside.
But Morgan Stanley energy analyst Stuart Baker described the CNOOC takeover theory as "nonsensical", given the presence of Shell as a long-term shareholder of Woodside.
It would be "more logical" for people to speculate about when Shell might eventually "come back to clean up the balance" of Woodside, he said this week, in reference to Shell's failed bid in 2001.
Shell Not Seen As Willing Seller
Deutsche Bank analyst John Hirjee agrees that CNOOC would face some formidable obstacles, even if it is interested in Woodside.
"If they (CNOOC) thought that the U.S. Congress was tough, I don't think the Australian government will lay down either," he said.
For its part, Shell seems content to bide its time, backing Woodside's LNG and oil expansions, perhaps waiting for an opportunity to rekindle its takeover should Australia's political climate become more receptive.
"As a shareholder of Woodside, Shell is very pleased about the Pluto discovery and Woodside's plans to progress the development of the field," Shell Australia chairman Tim Warren said in a statement.
Warren has declined to comment on the CNOOC talk, but has given no sign that Shell's Woodside stake is for sale.
Indeed, the Anglo-Dutch oil major has said that it wants to focus on its core exploration and production business. It recently sold refining, chemicals and power generation assets as part of a US$15 billion divestment plan.
Voelte, meanwhile, said that Woodside is getting "surprising interest" for Pluto from Atlantic Basin markets, alongside potential customers on the U.S. West coast.
But PFC's West, a former assistant secretary of the interior in the Reagan administration who now specializes in energy strategy, said that Voelte will have his work cut out in trying to break into the Californian gas market.
Woodside and BHP are both proposing separate LNG receiving terminals off the coast of California.
But West said that local opposition to the plans has been "great".
"California is a very large and attractive market," he said.
"But I think it is going to be very challenging to actually construct and deliver gas to California directly," he said.
Copyright (c) 2005 Dow Jones & Company, Inc.
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