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Woodside Shifts Focus to Browse

Woodside Shifts Focus to Browse

Date: 22 May 2014

The Browse floating LNG project in Western Australia will be the focus of Woodside Petroleum's next phase of growth, after the group abandoned its deal to acquire a stake in  the $US2.7 billion ($A2.88bn) Leviathan offshore gas field in Israel.

During an investor briefing in Sydney, Woodside said it expects its Browse project to be the cornerstone of its next growth phase and it expects minimal or no equity issuances will be required throughout this period.

Yesterday, Woodside Petroleum terminated its agreement to take a 25 per cent stake in the Leviathan gas field, saying it will not proceed with a memorandum of understanding agreed with the parties earlier this year.

The group told investors this morning that it is targeting investments in a range between $1 billion and $5 billion, but said all investments need to be a strategic fit and stand on their own merits.

The petroleum exploration and production company said it is targeting a volume uplift of 3 to 5 per cent on existing assets.

The group also said its goal is to maintain access to capital at the lowest cost in order to fund growth and expects five-year average gearing of around 21 per cent, but is targeting 25 per cent gearing.

Capital management issues on board's agenda

Woodside chief executive Peter Coleman told investors he would discuss capital management issues with his board following the company's exit from the Leviathan gas project.

Mr Coleman said Woodside's management team was aware of the freeing up of cash that arose from the exit from the Israel-based project and had been "scenario planning" for some time.

"I would expect we would be talking to our board in the not too distant future about some of the options we have," Mr Coleman said.

Mr Coleman said he was committed to keeping Woodside's balance sheet "exercised" but management wanted to be considered in its actions, saying other companies had announced special dividends only to follow them up with a capital raising a short time later.

Earlier chief financial officer Lawrie Tremaine said Woodside planned to maintain its current dividend payout ratio as it generates significant free cash over the next three years.

Mr Tremaine said that free cash flow levels would increase well above the 2014 dividend level forecast by analysts.

"We expect we will be able to maintain our current level of dividends for the foreseeable future," Mr Tremaine said.

Return of surplus cash was identified as a priority after debt servicing, dividend payment and growth capital.

Woodside's dividend ratio is currently 80 per cent of underlying net profit after tax.

The exit from the Israel-based Leviathan project sparked calls for a capital return to investors.