The Woodside Petroleum Limited (ASX: WPL) share price is on watch this morning as it announced an exit of one of its proposed developments. What does this mean for the Woodside share price?
Woodside is Australia’s largest independent oil and gas company with a global portfolio and competes with Santos Ltd (ASX: STO).
WPL share price
Kitimat development exit
Woodside has decided to exit its 50% non-operated participating interest in the proposed Kitimat LNG (KLNG) development, located in British Columbia, Canada.
This exit is expected to impact FY21 net profit after tax (NPAT) by around US$40million to $60 million.
The company notes these costs will be excluded from the underlying NPAT for the purposes of calculating the dividend.
The KLNG project was initially designed to develop a new source of liquefied natural gas to Asian markets but Woodside has decided to prioritise the allocation of capital to opportunities that can deliver greater short term value.
My thoughts
It appears this decision may have been made in light of the growing adoption of renewable sources of energy. If so, it’s encouraging to see Woodside turning its mind to more value accretive opportunities.
In saying this, Woodside’s key revenue sources stem from fossil fuels, which is not a structurally growing industry.
Whilst it’s still quite sometime before renewable sources completely replace fossil fuels, I prefer to invest in businesses with long industry tailwinds.
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