Monday, March 11, 2013

Walk from James Price a win for Woodside | The Australian

Walk from James Price a win for Woodside | The Australian:
THE wallets of shareholders could be the big winners if, as expected, Colin Barnett's re-election sets in motion the series of events that ultimately will see Woodside Petroleum and its partners walk away from the proposed $US45 billion ($43.9bn) James Price Point LNG plant.

Don't be surprised if, now that he's been safely re-elected, the positive rhetoric from the West Australian Premier towards the controversial proposal begins to ease.'Walk from James Price a win for Woodside'-

Barnett has been an increasingly lone voice in his advocacy for James Price Point. But as his protestations have become louder they have reinforced the perception the plan is an increasingly challenged proposition. Rising costs, a strong Australian dollar and increased uncertainty around both the long-term direction of liquefied natural gas markets and the future of LNG pricing mechanisms are likely to ensure the more than 40-year wait to exploit the huge but remote Browse gas reserves continues for at least a while longer.

The political impact of the partners scrapping James Price Point today is far less damaging for Mr Barnett than it would have been on Friday, given how strongly he has advocated for it and how damaging such a move could have been to his campaign.

The Browse partners, for their part, did the right thing during the past few months and kept their mouths shut when quizzed about their intentions.
Rather than being bad news for Woodside, scrapping James Price Point could present an opportunity to become the pre-eminent dividend-payer among Australian oil and gas stocks.
And it could give the company the chance to finally resolve the Royal Dutch Shell overhang that has been a burden since Shell made its original partial sell-down, back in late 2010.
The near-doubling in net profit to just shy of $US3bn, announced by Woodside at its recent full-year results, reinforced the rude profitability in which the company now finds itself.
That cash flow gives Woodside a fantastic opportunity to differentiate itself from its peers in the Australian-listed oil and gas sector, and the chance to establish itself as a company offering substantial and sustainable returns.
Its stakes in the North West Shelf LNG project and its Pluto LNG project -- completed early last year after years of schedule headaches and painful cost-blowouts -- are now generating serious volumes of cash.
Deutsche Bank analyst John Hirjee estimates that Woodside could throw $US2.5bn at capital management this year, and get moving on returning the more than $US3bn in franking credits it has amassed during the capex frenzy of the past few years.
Investors today are less willing to back stocks driven by long-dated, high-capex growth opportunities and are increasingly orientated towards yield.
An enthusiastic embrace of capital management by Woodside at a time when peers such as Santos, Oil Search and Origin are all feeling the pain of cost-blowouts and delays at their LNG developments would certainly distinguish Woodside among local oil and gas stocks.
On Mr Hirjee's calculations, Woodside -- assuming it dumps James Price Point -- could manage a special dividend this year of $US3.04 a share. When interim and final dividends are added, Woodside could offer a total yield of about 11.9 per cent -- an eye-catching figure in any industry, but especially so in a resources sector with a history of low dividend yield.
Woodside's rapidly expanding cash pile, low capex needs and bulging franking credits position could help it make real inroads into reducing Royal Dutch Shell's overhanging position on the company's share register, through a partial buyback.
Shell sold a 10 per cent position in Woodside in late 2010, leading to plenty of speculation since then about its intentions for its remaining 23.6 per cent.

Since that first sell-down, the value of Shell's remaining stake has fallen from about $US8.1bn to about $US6.5bn.

Mr Hirjee believes that Shell, despite being a foreign company, would be entitled to franking credits, given that it has substantial operations in Australia that pay tax.

He believes Woodside could execute a buyback for some of Shell's stake, with the buyback being 50 per cent a deemed dividend (opening up the potential for franking credits) and 50 per cent a return of capital.
The Deutsche Bank analysis works on an assumed buyback price of $35 a share, but franking credits help improve the notional value of the buyback to more like $42.50 -- higher than the $42.23 at which Shell completed its original sell-down.

Such a plan would require Shell's willingness to participate, and, given its moves in recent months to up its interest in Browse and its behind-the-scenes efforts to push for a floating LNG solution for the project, it may not be willing to cede its influence over the project by decreasing its Woodside stake.

But the key point is that Woodside certainly has plenty of options in a post-James Price Point future. Abandoning James Price Point would not be an end for the company but a beginning, particularly from a capital-management perspective.

James Price Point's biggest champion, Barnett, won't be happy with that decision.
But at least he'll be able to console himself from the comfort of the Premier's chair.


  1. Let me congratulate you on one of the best "front pages" I have ever seen on your blog,excellent.


    I was thinking this morning,"...after Barnett comes down from the sugar hit of his victory,what will the real world look like to him?Even from the view he has from his Palace".

    Having looked through this mornings news stories it seems all is not well for the now super powerful premier.(a situation that could be very dangerous for someone with his style)

    His 2 main resource projects,Oakajee and JPP,rely on his Chinese buddies being very gung ho about their overseas investments.
    The news isn't good.


    BEIJING (MarketWatch) — China’s policy makers are grappling with an uptick in inflation, just as industrial output and retail sales seem to be softening, data released on Saturday showed.

    Compounding the challenges for the government, property sales have been soaring, rising 77.6% from last year’s levels in value terms over the first two months of the 2013, and highlighting the difficulties in keeping the economy growing at a steady pace while avoiding steep rises in prices.

    The rising cost of food is one of the main concerns among China's people because wages have not risen as fast.

    "If monetary policy remains at the current loose stance, CPI in 2013 will likely be much higher than the 3.5 per cent target. We expect policy will tighten."

    The National Development and Reform Commission, China's main economic planner, said last week that the People's Bank of China was likely to raise interest rates if inflation stayed above the 3.5 per cent target for three consecutive months.

    The current lending rate in China is 6 per cent and deposit rates are 3 per cent.


    THE numbers on China's growth and inflation in the first two months of the year make for sobering reading.

    Consumer prices rose 3.2 per cent year on year in February, up from 2 per cent in January and the highest level since last April. That partly reflects the impact of the Lunar New Year holiday, also known as Chinese New Year, which caused a spike in food prices. But the figure is also higher than expected, and points to a bumpy ride for inflation. Industrial output growth fell back to 9.9 per cent from 10.3 per cent at the end of 2012.


    CHINA'S demand for iron ore fell for the second consecutive month in February, with imports of the commodity down 14 per cent.

    The fall follows claims by China's national planning agency that the biggest seaborne iron ore producers -- Rio Tinto, BHP Billiton and Brazil's Vale -- had acted to keep prices high by orchestrating perceptions of supply shortages.


    Findings from a new report by Clayton Utz, which examined the $101 billion investments into the booming sector by Chinese investors from 2005 to the end of last year.

    "The preferred investment method was the acquisition of strategic stakes in companies, with 65 per cent of the total number of investments during the period for an acquisition of shares at the corporate level," Clayton Utz Melbourne corporate partner Jonathan Li said.

    "Only in 23 per cent of investments was the preferred investment an acquisition of an interest in a project or an asset."

    Interest from the economic powerhouse in the steelmaking ingredient iron ore had weakened since peaking in 2009. The sectors that experienced keen interest in the three years to the end of last year were oil and gas, uranium and gold.

    The gold rush of the 1850s continues to the present day, with 97 per cent of investments by value in the gold sector made during the eight-year period announced in the two years to the end of 2012.


    THE wallets of shareholders could be the big winners if, as expected, Colin Barnett's re-election sets in motion the series of events that ultimately will see Woodside Petroleum and its partners walk away from the proposed $US45 billion ($43.9bn) James Price Point LNG plant.

  2. cont....

    Investors today are less willing to back stocks driven by long-dated, high-capex growth opportunities and are increasingly orientated towards yield.

    An enthusiastic embrace of capital management by Woodside at a time when peers such as Santos, Oil Search and Origin are all feeling the pain of cost-blowouts and delays at their LNG developments would certainly distinguish Woodside among local oil and gas stocks.


    Abandoning James Price Point would not be an end for the company but a beginning, particularly from a capital-management perspective.

    James Price Point's biggest champion, Barnett, won't be happy with that decision.

    But at least he'll be able to console himself from the comfort of the Premier's chair.


    (it will be a very uncomfortable chair should he decide to go ahead and continue bullying the people of Broome and the Dampier Peninsular and all their supporters)


    Perth and the changing climate - a situation the premier wants to make even worse.For example if the weather pattern over east was to happen in the south west,how would he handle that?

    "Perth had close to its average March rainfall in just 90 minutes this morning.

    Residents in some far northern suburbs reported drenchings of more than 40mm.

    Flooding on the Mitchell Freeway northbound after Hutton Street closed the left lane after the exit ramp.


    Melbourne's heatwave has set more records

    It's the first time Melbourne has had eight consecutive days of such heat outside summer, with only four stints over the previous 156 years of records.

    “It's a bit like Melbourne on the Murray,”


    The public transport woes continue without respite.

    UPDATE 9.15am: Trains heading to Perth from Midland were at a standstill for more than an hour this morning after a power failure.

    A spokesman said a packed eastbound train lost power near East Perth just after 8am.

    Another train was used to shunt the train to Claisebrook after passengers cleared the tracks.

    It is understood passengers lost patience with the delay and made the decision to leave the train.


    His big city projects,how will they fare?

    "Colons" Quay underway,and the big stadium in the swamp will be due to start soon.

    All his election promises - a hangover no doubt!

    The spriralling state debt.

    How about fracking and our precious water?


    From the US state of Texas.

    The Texas Tribune

    As Fracking Increases, So Do Fears About Water Supply

    CARRIZO SPRINGS, Tex. — In this South Texas stretch of mesquite trees and cactus, where the land is sometimes too dry to grow crops, the local aquifer is being strained in the search for oil. The reason is hydraulic fracturing, or fracking, a drilling process that requires massive amounts of water.

    “We just can’t sustain it,” Hugh Fitzsimons, a Dimmit County bison rancher who serves on the board of his local groundwater district

    From 2009 to 2012, water production from one well on his ranch fell by two-thirds, a problem Mr. Fitzsimons linked to nearby wells pumping water for fracking operations.

    A study commissioned by his groundwater district found that in a five-county area that includes Dimmit, fracking reduces the amount of water in the Carrizo-Wilcox Aquifer by the equivalent of one-third of the aquifer’s recharge. Recharge means the amount of water an aquifer regains from precipitation and other factors.

    The amount of water used in hydraulic fracturing — roughly 4 million to 6 million gallons per oil or gas well — has stirred concerns around Texas as the drought wears on and the drilling boom continues.

    .. in some drilling hotbeds like Dimmit County, the proportion of water used for fracking has reached the double digits and is growing along with the oil boom. Companies are springing up to offer recycling, and some drillers are able to use brackish water, but those technologies are often not cost-effective.


    Any re-cycling of fracking water planned for WA?


    So what legacy will Barnett leave?
    Where will we be 4 years from now?

  3. "It is understood passengers lost patience with the delay and made the decision to leave the train."

    Barnett and his mining buddies are the first to blame cost and time blowouts on workers,BUT,can anyone imagine the damage this commuting crisis is having on WA's productivity?

    Even FIFO's trying to make a flight must be under enormous stress.

    But how would anyone go having to wear this day in day out?

    And there is no end in sight,it is only going to get worse.


    I have a feeling JPP protestors have heard all this before.

    APPEA: Activists Campaign Is against Energy Security, Jobs (Australia

    The latest campaign targeting Australia’s natural gas industry is really a campaign against the energy that powers our homes, Australian jobs and investment in our economy, the Australian Petroleum Production & Exploration Association (APPEA) warned today.

    APPEA Chief Operating Officer Eastern Region Rick Wilkinson is urging MP’s not to be hoodwinked by a well-resourced campaign launched today by activists whose agenda is clear.

    “This is the battle for the end of the fossil fuel industry. This is the end game…” (Lock the Gate Alliance President Drew Hutton – Coal Seam Gas News April 29, 2011)

    Mr Wilkinson said: “Lock the Gate is well-credentialled in the art of misinforming people in public office and the community in general.

    “In recent years both a NSW and Federal Senate inquiry into coal seam gas production were deliberately mislead by an organisation that claims to work on behalf of the farming community.

    “The leader of the group, Drew Hutton, was severely embarrassed with his admission that claims they made to both a NSW and Senate Parliamentary Inquiry was falsified.

    “This serious breach followed the distribution of a hoax letter to farmers detailing false claims about a non-existent mining company.


    “In recent weeks there has been a spate of violent and menacing behaviour from activists towards farmers who have, of their own free will, given permission to gas companies to explore for natural gas on their properties.

    “Police have been spat upon, farmers and their families intimidated and small business owners hounded by extremists who continue to ignore the legal rights of businesses that have been given the environmental approvals necessary to conduct their work.

    “One gas company even received a bomb threat.”


    With NSW importing 95 per cent of its gas supply from South Australia, Queensland and Victoria, the five per cent of the state’s gas produced in NSW is all CSG, and a third of eastern Australia’s natural gas is CSG-based.

    With long-term gas supply contracts due to expire soon NSW has set a course for higher energy prices. Residents and businesses across NSW won’t be immune.


    More spitting and bombs eh.

  5. Day 2 of Colons 2nd term and it seems some things wont change.


    Influential Federal Labor Minister Gary Gray has made an explosive intervention into the debate over Woodside's $40 billion Browse gas project, arguing that floating LNG processing would put Australia at the cutting edge of technology for generations.

    The former Woodside executive and Special Minister of State is the first senior Gillard Government member to break cover on the issue of whether gas should be processed onshore at James Price Point or on huge floating vessels offshore, as for Shell's Prelude field.

    Mr Gray told _WestBusiness _that rather than fear offshore processing, which some argue would cost local jobs, the technology was an opportunity for WA in particular to broaden its expertise and economy.

    "Australia is at a unique intersection in gas processing

    "We now have not only unconventional gas being converted to LNG in Queensland, but we also have development of offshore floating processing through the possibility of Prelude (and other fields).

    "That takes Australia to literally the technological cutting edge of the growth export industry on the planet, energy.

    "That is a great future to have for our kids, it is a great future to have for our resources."

    His comments will set him on a collision course with some unions and freshly minted Premier Colin Barnett, who argue jobs will be lost if an offshore option is used.



    Social advocate Ian Perdrisat describes Labor’s poor primary vote in the Kimberley as a “wake up call.”

    Whatever the final result it is time for the major parties to take note of the extent of community support for protecting the Kimberley from mass resource exploration and development. The battle for the Kimberley is on with both sides of government at state and federal levels offering National Parks and Marine Parks to woo environmental approval. Unfortunately mining and drilling can still takes place in these Parks. Vast sections of the Kimberley remains unprotected and this country is at risk of total devastation. The National Heritage Listed Mardoowarra-Fitzroy River is an example where Aboriginal Heritage sites in fragile wilderness will suffer mass destruction if a new coal and uranium mining province is allowed to proceed. Mining tenements cover the broad savannah plains that line both sides of the river and unconventional gas frackers plan to stretch out further covering the land and poisoning the underground water that feeds the springs, lakes and soaks that provide water to the people, plants and animals that give life to the country.


    New laws to give feds more power over CSG wells and coal mines

    Federal approval powers over coal seam gas wells and big coal mines will be extended under new laws announced by the Gillard government on Tuesday.

    Federal cabinet has approved an extension of federal environmental powers to cover the potential cumulative impacts on water of new wells and mines – a move independent MP Tony Windsor has been demanding since he agreed to support Labor to form government in 2010.

    The decision to include water as a trigger in the federal Environment Protection and Biodiversity Conservation Act comes as the campaign against coal seam gas projects intensifies in many marginal electorates, despite the NSW government's recent decision to impose a two-kilometre buffer between gas wells and townships or farms and the withdrawal of AGL's plans to expand its project in western Sydney.

    The government plans to introduce legislation to ratify the water trigger as soon as possible.


    The Coalition says the increased powers are not necessary and they could face a constitutional challenge.

    Mr Windsor has insisted it is ''nonsense'' to suggest the move is unconstitutional.

    He said on Tuesday that the announcement was ''a win for water and for the farming sector reliant on water''.


  6. cont...

    Mr Windsor said it was a win for water and for the farming sector reliant on water.

    “It is important to have a process in place to give all involved confidence that any decision made would be based on science and not on short-term economic return to the state governments,” he said in a statement.

    “My push has always been about getting a process that the community can have confidence in.”


    Hot sea threat to popular fish

    Bread-and-butter recreational fishing species such as herring may become harder to catch off Perth and abalone stocks could be liable to mass deaths if ocean temperatures continue to rise.

    The CSIRO has revealed that the west coast has had its third marine heatwave in as many years and the Fisheries Department said the trend could fundamentally change the State's fisheries.

    Scallops, crabs and abalone in the Mid West and Gascoyne were among fisheries that collapsed in the summer of 2011 when water temperatures up to 5C above normal swept down from the tropics.

    Yesterday, at a seminar to discuss the phenomenon, senior CSIRO scientist Ming Feng said there had been a repeat of the heatwave this summer and last, though to a lesser extent than in 2011.

    Dr Feng said that the events had been partly caused by a shift in the timing of the Leeuwin Current to summer when water temperatures were already warm, rather than in April to June.

    He said the change in timing and warming water in the tropics meant marine heatwaves were likely to become increasingly common.

    The comments came as the Department of Fisheries said there had been a fall in the number of herring - a popular fish species targeted by shore-based anglers - caught off Perth.


    Gary Jackson, a principal scientist with Fisheries, said the "severe drop-off" coincided with the sharply higher temperatures and suggested herring were migrating south to cooler water.

    However, he noted the changes were heralding a bounty of fish species usually found in tropical waters - such as Spanish mackerel - being caught off Perth and the South West.


    The department's Anthony Hart said the collapse in abalone stocks on the Mid West and Gascoyne coast in 2011 had been unprecedented and they would take decades to recover.

    Dr Hart also said Perth's abalone supplies could suffer a similar fate if there was a comparable jump in water temperatures to those recorded further north two years ago.
    At the least, he said, size limits were likely to be reduced because the changes in the marine environment were affecting the rate at which abalone off Perth grew.


    How much longer will we have sand dunes on Cable Beach?

    The latest erosion is shocking!

    And yet still on high tides the Shire rangers ignore all the 4 WDs that have crushed the vegetation trying to grow across the scars.

    And they all park their Land Cruisers up in the dunes.

    One more big storm and...

  7. Miners lobby 'last hope' Tony Abbott

    RESOURCE employers have declared the Coalition the business community's "last hope" on workplace relations, urging Tony Abbott to commit to changes to the Fair Work Act that would allow companies to reach four-year non-union agreements with employees that ban strikes.

    The Australian Mines and Metals Association has written to Julia Gillard and the Opposition Leader calling on them to support an array of changes to workplace laws, asserting that the current legislation was not compatible with Australia remaining a "competitive destination for investment and job creation".

    (and no green tape or red tape,and no NO)


    It would be fair to say this has nothing to do with environment or social issues,my god look at the mountain top removers and the poor people who have to live in the shadow of that.And all the other mess the hypocrits make,everywhere.

    RIO Tinto has run into further headwinds at the $US12 billion ($11.7bn) Oyu Tolgoi copper and gold mine in Mongolia after the US raised questions about environmental and social issues, providing more ammunition for the project's opponents.

    The US Treasury said it had abstained from voting on whether the World Bank and the European Bank for Reconstruction and Development (EBRD) should help fund the mine because the mine's environmental and social impact assessment (ESIA) was not up to scratch and there were concerns about an associated coal-fired power station.

    The US also threw a spotlight on the plight of camel and goat herders around the mine who had been forced to relocate.

    In 2010, the US, the world's biggest per-capita greenhouse gas emitter, abstained from voting on an IFC loan to fund coal plants in South Africa because of the potential effect on climate and the World Bank's stated commitment to be a leader on climate change.

    While not passing judgment on the relocation of herders, the US said it was "keenly interested" in the outcome of an IFC study into herder complaints.


    Rio and BHP to offload $US35bn in assets, Deutsche Bank estimates

    AUSTRALIA'S top miners, BHP Billiton and Rio Tinto, could target asset sales of around $US35 billion, with their newly-appointed chief executives keen to reduce debt, a new analysis found.

    The market has widely speculated on the sale of non-core assets by the major miners but the recent appointments of new chief executives at both companies means the focus is now on consolidation mode.

    Deutsche Bank analyst Paul Young said the new management would clear out non-core assets with little hesitation. He analysed the portfolios of both companies and assessed that BHP has the potential to make $US25bn of asset sales, while Rio could be targeting $US10bn worth of sales.

    Mr Young said both miners had expressed regret at being too slow to sell assets.

    “In BHP's case, it was not selling its aluminium and nickel assets in the last price rally and in Rio's case it is not selling out of non-core aluminium assets quickly enough after the Alcan acquisition,'' he said. “We now expect both companies to move quickly on asset sales.''

    The resources analyst identified assets for sale from Rio's diversified suite could be diamonds, its Canadian iron ore assets, Pacific Aluminium, Eagle Nickel and other non-core aluminium assets.

    BHP's potential targets include Alumar alumina and thermal coal assets, Nickel West, manganese, non-core oil assets in countries such as Pakistan, Trinidad and Tobago and Algeria and Pinto Valley copper.