Woodside Petroleum is up Nearly 2%, but Will the Trend Continue?

Woodside Petroleum Limited [ASX:WPL] was founded in 1954 with a focus on petroleum discovery and extraction.

Since then, expansion has included significant investment in the gas sector; Liquefied Natural Gas (LNG) has gradually expanded in importance within the firm’s portfolio. While headquartered in Perth, WA, the company has a global presence.

The company stock is up 1.66 percent as of writing, or .58 points. WPL has been increasing since March — over a 20% rise…

Why did this happen to Woodside Petroleum’s shares?

The uptick is unsurprising, given recent events and broader macroeconomic conditions.

In the past week, OPEC members agreed to increase production by 1 million barrels per day. In theory, greater production means a lower crude price and lower stock valuations for oil-producing companies.

But the announced increase was less than markets anticipated. So instead of falling, oil prices shot up 4% upon the news.

This may partly explain today’s surge in WPL. But Woodside’s relatively large amount of LNG activity likely dulls the effect.

Another possible explanation is the current period of synchronised global growth. As growth mounts, higher industrial and consumer demand pushes up energy stock prices.

Woodside Petroleum is enjoying this sweet period of strong cashflows and dividends, which are boosting shareholder confidence and stock value.

So, will the recent gains persist into the long term? Maybe, maybe not.

What’s next for Woodside Petroleum?

While the short-term outlook for Woodside remains rosy, future revenue streams look far less certain.

New ventures must be periodically established as old fields become inactive. Investment in exploration is highly risky and returns are uncertain. Resource exploration will become more expensive and less fruitful as oil and LNG become scarcer — without new production there could be LNG shortfalls as soon as 2022.

While the company says it is optimistic about growing LNG demand, estimating a 4% per annum increase, will they be able to keep up?

Regards,

Ryan Clarkson-Ledward
For Markets & Money

PS: The Aussie Recession Survival Guide: There may be more reason to stay sceptical of upped share prices.Australia could be headed for a recession in 2018. But there’s a few steps you can take now to protect your family’s wealth. Find out more here.


Ryan Clarkson-Ledward is a junior analyst for Markets & Money. Ryan has degrees in both communication and international business. His priority is bringing you the latest price updates on stocks through ASX updates, as well as supporting Sam Volkering with background research. As part of the team at Markets & Money his aim is to provide unbiased and relevant news for readers. Ryan’s work with Sam is designed to provide research that complements Sam’s analysis for small-cap and technology stocks. Together, their objective is to break through all the jargon and give you the hard facts to inform your investment decision-making. Ryan writes for:


Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money