Morningstar publishes a number of special reports that provide in-depth analysis of individual securities, sectors and asset classes. Mark Taylor has recently published a report on Woodside Petroleum.

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We think no-moat-rated Woodside Petroleum (ASX: WPL) is 20% undervalued, and rate it the best value of the three large Australian exploration and production companies; the others are Santos and Oil Search.

Our upgraded AUD 40.00 fair value estimate assumes 60% growth in annual production to 130 million barrels of oil equivalent by 2024.

We don't believe the market sufficiently credits Woodside's ability to complete a capital-efficient second Pluto LNG train, nor its ability to increase North West Shelf Joint Venture life to greater than 20 years, and unfairly so. In our opinion, the stars increasingly point to development of new resources, and the Browse Joint Venture and the NWS/JV are progressing commercial discussions and joint technical studies on the feasibility of NWS infrastructure processing the Browse resources. Mutual interest is likely to see the development cost favourably amortised over both assets in a two-birds-with-one-stone approach.

 

Mark Taylor is a Morningstar senior equity analyst. Any Morningstar ratings/recommendations contained in this report are based on the full research report available from Morningstar.

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