Woodside Petroleum Limited (ASX: WPL) has great opportunities for long-term growth through its offshore projects in WA and internationally to continue its record of growing earnings in the future.
The oil and gas company is offering an attractive 5.43% dividend yield on its $37.66 share price. FY2013 reported net profit was US$1.74 billion, its second highest annual profit ever after FY2012's result, which itself contained extra earnings from a partial equity gain on a sale involving its Browse project. The rise in earnings was maintained from previous years.
Past earnings growth capability
Over the past nine years, underlying net profit has risen by a compounded 13.1% average annual rate, so the company has a steady record of growing profits. Net profit margins are usually in the high 20s, early 30s, though its return on equity has been sliding from the 20s down to the 11.1% in FY2013.
Bringing projects online for 1 billion barrels of oil equivalent (boe)
Upcoming projects like Browse and the North West Shelf are still in the planning stage and may not all be executed until Q1 2016, around two years from now. Investing in their development will take a lot of funds, but free cash flow has expanded greatly over the past two years by $5.9 billion. More oil and gas production coupled with higher commodity prices are making that more possible.
The company will have over a billion barrels of oil equivalent available to be developed over four projects, with the majority coming from the Browse project.
Share price and PE
It has a 16.2 PE, which has been working its way up slowly from 13 in 2012 and is toward the middle of historic PEs between 11 and 23. The 5.42% dividend yield and historic average annual earnings growth trend of around 13.1% added together indicate a reasonable price for the stock.
Foolish takeaway
This is where long-term investing comes in with the perspective that quick gains at this scale aren't easy. You can't be fixated on a short time frame, but must think of the business of the company rather than merely follow the stock price.
