Here's why it's time to turn bullish on Woodside Petroleum Limited

A 40%+ fall in oil prices could actually help Australia's largest energy producer and turn on the juice in 2015 for acquisitions.

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Who would have thought that a 40%+ fall in oil prices could actually help Australia's largest energy producer? Woodside Petroleum Limited (ASX: WPL) has been the target of criticism of moving too slow in building up its production pipeline, even being too conservative in acquisitions and investing in new oil and gas projects.

It turns out the energy company is like a seasoned stock picker. It took its time to find good investments, ignoring the market noise to "do something quick" and even took advantage of a swift and heavy drop in its own market to pick up some discounts.

Below are several reasons why Woodside Petroleum is looking good and it's time to turn bullish on the oil and gas giant.

New acquisition of Apache's LNG stakes

Before oil prices started to really slide, US-based Apache Corporation (NYSE: APA) decided to sell off non-US shale oil related assets overseas. Its shareholders wanted the company to focus on its US domestic shale oil projects. At the same time, Woodside was looking for acquisitions to fill its production pipeline. It had at least US$2.5 billion available after rejecting an investment in a Middle East LNG project. Woodside announced the US$2.75 billion purchase of Apache's stakes in the Wheatstone LNG project (soon to start producing), the Balnaves oil project (currently producing) and a 50% stake in a Canadian LNG project (still in planning). The plummeting oil price would have played a role in negotiations, making Apache more willing to part with the assets.

Other acquisitions could follow

Thanks to strong cash flows from its currently producing LNG projects, it has more funds to make further acquisitions or investments. Having deep pockets when the oil industry is tanking is a classic move by a low-cost producer. It can pick up assets on more attractive terms and ride out an oil bust longer than many other oil and gas companies on the ASX.

Strong profit margins as oil prices hit five-year lows

In FY 2014, Woodside had about a 28% net profit margin. Multi-year low oil prices could impact upon Woodside's earnings, but high profit margins give the company a thick buffer in case of reduced revenues. Market leaders typically can survive longer on less than smaller competitors.

Big dividend yield

One of the big attractions for investors is the whopping 6.4% fully franked yield the stock offers. Oil prices could still slip further, but the stock has found investor support around $34 a share. It even rallied recently to $36.60. If oil prices do moderate over the next several months, oil and gas companies will start to rise, so picking up Woodside shares now could help secure a discounted price and a superior yield.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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