Woodside Petroleum Ltd

[Finance Management 712FMGT AQF 8]

This report analyses the historical (for the last five years) performance of Woodside Petroleum Ltd. covering both qualitative and quantitative performance to determine investment decisions.

Word count: [.. 2,432..]

Executive summary

Woodside Petroleum Ltd is an Australian oil and gas drilling and exploration business corporation and is listed in the stock exchange since 1971.  Their main headquarters is in Perth, Western Australia and has an international office in Yangon, Myanmar. This company has been chosen for the report as to make recommendations for investment in Yangon Stock Exchange if it will become listed locally.

For more than 50 years there has been no stock exchange until the Yangon Stock Exchange began trading on 25th March, 2016. The country had its first democratically elected government in office in 2015 that replaced the military government and thus one of the economic reforms was to launch the Yangon Stock Exchange. The first few stocks listed so far have been financial, real estate, healthcare and airline services.

Woodside began its operations in Myanmar since 2013 through Woodside energy (Myanmar) Pte Ltd where the country has under explored deep water areas and has potential opportunities in the domestic energy market. The company has gained early mover advantage and have 47,000 square kilometres of acreage in Rakhine basin. There is also the latest discovery from of more than 30,000 square kilometres of 3 D seismic being planned (‘Preliminary 2015 Woodside Petroleum Ltd. Earnings Call’).

Looking at the five year financial analysis of the company does not make investors comfortable. There are signs of instability and the last financial year of December, 2015 does not show attractive projection for the future.

Table of contents

1.        Introduction        4

2.        [… Financial Statements…]        5

2.1         […Income Statement…]        6

2.2         [… Balance Sheet…]        7

2.3         [… Cash flow Statement…]        9

3.        [Financial Ratios ….]        9

3.1         […Liquidity Ratios…]        10

3.2        [… Profitability Ratios…]        12

    3.3 […Capital Structure Ratios…]        12

         3.4[…Market Value Ratios…]……………………………………………………………………………………..           13

4.        [The Dividend Discount Model ….]        14

5.         Conclusion  and Recommendations        15

Reference list        16

Appendix 1 – Financial statement of Woodside Petroleum Ltd        17

19

     Appendix  3 -  Industry Averages of Woodside Petroleum Ltd. .....……………………………………20

     Appendix 4 – Historical Prices of Woodside Petroleum Ltd …………...................................21

1.        Introduction

Financial management is that activity of management which is concerned with planning, acquiring, controlling and utilizing firm’s financial resources to maximize the efficiency of the organizational operations. It is the concept of finance which includes capital, funds, and money. It is also concerned with the analysis of the cash flows in investment and budget decisions. Managing profitability and liquidity are the two core activities of financial manager to make optimum and efficient use of the organizational funds whereby one incorrect decision may lead company to be bankruptcy of an organization.

There are 3 types of business organisations which are sole proprietor, partnership and corporation. This report will examine the financial performance of Woodside Petroleum which is an oil and gas corporation in Australia by evaluating both quantitative and qualitative elements of the company. The commonly method used to evaluate the performance of the company are ratios which are computed for the last five years.  The aim and purpose of the analysis is to evaluate the company’s operations and performance and to make a recommendation to invest in the company or not to invest.

Woodside Petroleum Ltd was founded in 1954 with headquarters in Perth, Australia and is a publicly listed oil and gas extraction company with employees around 3,450 people with its headquarters in Perth, Western Australia. It engages in the exploration, evaluation, development, production, marketing, and sale of hydrocarbons in Australia and internationally. The company’s products include liquefied natural gas, pipeline natural gas, condensate, liquefied petroleum gas, and crude oil. It is ranked number 50 out of the top 2,000 companies in Australia (IBIS World,2016).  Woodside Petroleum Ltd was first listed on the ASX on 18th November, 1971.

Figure 1:  Recent Stock Price Movements of Woodside Petroleum Ltd

[pic 1]

Source: ASX 5-year daily data line chart modified by Mimi Tin Tin Aye

In the above stock price movement chart of Woodside Petroleum Ltd. indicates an upward trend from Jan 2013 to Jan 2014 with stock price movement from about $30 to $38 and the highest stock price reached about $44 from 2014.  In Jan 2015 to Jan 2016, shows a stock declined from about $34 and reaching its lowest point of $25. During the down trend, the buyers were losing interest thus prices pushed lower. However, after January 2016 it can be seen that the share prices have strengthened from $25 to $32 in Jan 2017. The uptrend suggests that buyers are again in the majority and thus pushing prices higher.

2.        Financial Statements

Financial Statements represent a formal record of the financial activities of any corporation. These are written reports that quantify the financial strength, performance and liquidity of a company.  There are three financial statements that stock investors need to become familiar with including the income statement, balance sheet and cash flow for Woodside Petroleum Limited.