Market Likes WPL, Dislikes TOL

By Glenn Dyer | More Articles by Glenn Dyer

Some big results yesterday, led by oil and gas giant, Woodside Petroleum which reported a 29 per cent rise in earnings to a record, driven by higher output and prices.

WPL said its net rose to $1.43 billion in 2006 from $1.11 billion in 2005. That was on a previously disclosed 39 per cent rise in sales to $3.8 billion.

But it could have been so much more. Twice last year Woodside was forced to downgrade its production estimates because of problems with two new oil fields, Einfield off the NW coast of WA and Chinguetti off West Africa.

The company, which remains 34 per cent owned by Shell, said these two new fields helped with a 14 per cent rise in output last year. That was around half the gain forecast at the time of the 2005 result and an illustration of what might have been.

The scalebacks prevented WPL from taking advantage of the record prices for oil and related products last year.

Woodside shares rose 83c to a high of $37.90 (with a touch of relief that there were no surprises in the announcement, as there was last year). They closed 46c up at $37.63.

The company said that excluding one-off items, net income rose 35 per cent to $1.395 billion, higher than broking estimates around the $1.32 to $1.38 million range. The one-off was a profit of $31.1 million on the sale of a share in an Australian offshore gas field.

The company is also battling to overcome the delayed start-up of the Otway gas project in Bass Strait. It is running up to nine months late.

That, along with the production problems at Chinguetti and Enfield, has put a crimp on the company’s plans to expand production and exploration.

At least six new infill wells are being drilled at Enfield this year at extra cost, to try and boost output while the problems at Chinguetti are problematic and more to do with the geology.

But the shortfall in revenues and extra spending on Enfield has caused budgets to be cut, despite the record earnings.

The company is being forced to curtail its ambitions. Investment in exploration and projects will be cut to around $3.6 billion this year, according to a presentation made by WPL to analysts yesterday.

That’s some $400 million down on what the company said last November. Exploration spending will be cut to around $420 million this year, from $485 million in 2006.

Woodside said its proven and probable reserves rose by around a quarter to 1.58 billion barrels of oil equivalent after it included some reserves from the proposed Pluto liquefied natural gas project. The company is still aiming to approve the project, costing between $6 billion and $10 billion, by mid-year.

However WPL slashed its share of estimated proven and probable reserves at the Chinguetti field in Mauritania by 58 per cent to 21.3 million barrels and is now looking to ‘maximise’ the value of its assets in the field.

That’s business code for ‘For Sale”, but given the problems, a quick exit may not be possible at an attractive price. Woodside has a stake in three undeveloped fields as well.

As reported in January, output rose to a record 67.9 million barrels of oil equivalent in 2006 and is expected to be between 72 million and 78 million barrels this year, down from a November forecast of 75-80 million barrels.

Woodside declared a final dividend of 77 cents a share, up from 58 cents a year earlier, making a total of $1.26 a share (93c in 2005).


Unlike the reception for the Woodside figures, investors didn’t really like the interim results from aggressive transport giant, Toll Holdings.

Despite the company revealing the first benefits of the nasty takeover of Patrick Corporation and the smoother move into Asia through SembCorp Logistics, shareholders abandoned the stock, selling it down by 71c to a low of $20.45. It closed at $20.55, off 61c.

Toll’s first-half net profit rose 87 per cent to $215 million and the company said that “Trading since December 2006 remains ahead of expectations and given the current conditions, full-year trading across the business will remain strong”.

Cash flow was higher; earnings from the Australian transport business, from ports, rail and Asia were also higher. Only New Zealand was down. Earnings per share were 43.3 compared to 34.6c and dividend was lifted to 16c a share from 14c.

So all in all it should have had a better reception. Perhaps the market has got ahead of Toll’s real position at the moment and the valuation is stretched as investors have factored in bigger and quicker gains from last year’s two big deals?

Toll made two major acquisitions last calendar year: stevedoring firm Patrick Corp and Singaporean logistics provider SembCorp Logistics (Semblog).

“The integrations (of the acquisitions) are on target,” Toll managing director Paul Little said.

Toll said the previously announced restructure of the group would provide shareholders with an opportunity to participate in the accelerated growth of two major listed companies.

“The outlook for both companies is very positive,” Toll said.

Toll announced in December that it intends to spin off its infrastructure assets into a separate company, freeing up its logistics operation to focus on overseas expansion. That will get around the need to sell off assets to meet concerns from the ACCC. That has yet to be approved though.

The new separately-listed infrastructure company will comprise Australia’s largest ports operator and the country’s biggest rail line-haul provider, Pacific National.

Toll said today that it was positioned for exciting new growth as all elements of the group performed very well, apart from softness in New Zealand trading where sales and earnings fell in the half.

However, New Zealand was expected to improve in the second half.

Mr Little said Toll’s Pacific National rail operations were expected to continue to im

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →