The Woodside Petroleum Limited (ASX: WPL) share price has been a positive performer on Tuesday.
In morning trade, the energy producer's shares are up over 1% to $22.77.
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Why is the Woodside share price rising?
Investors have been buying Woodside's shares following the release of an announcement this morning.
According to the release, Woodside has decided to exit its 50% non-operated participating interest in the proposed Kitimat LNG (KLNG) development in British Columbia, Canada.
Management notes that the exit will include the divestment or wind-up and restoration of assets, leases and agreements covering the 480 km Pacific Trail Pipeline route and the site for the proposed LNG facility at Bish Cove.
However, Woodside will retain a position in the Liard Basin upstream gas resource.
What now?
Woodside will work with Kitimat Joint Venture participant and operator Chevron Canada (Chevron) to protect value during the exit. Chevron also announced its plan to divest its 50% interest in KLNG in December 2019.
The exit will come at a cost. Management estimates that its decision to exit KLNG will impact FY 2021 net profit after tax by approximately US$40 million to US$60 million. Positively for shareholders, these costs will be excluded from underlying net profit for the purpose of calculating its dividend.
Management commentary
Woodside's Acting CEO, Meg O'Neill, explained that exiting KLNG will allow the company to focus on successfully delivering higher value opportunities in Australia and Senegal.
She said: "Following Chevron's decision to exit KLNG and subsequent decision in March 2021 to cease funding further feasibility work, Woodside undertook a comprehensive review of our options for the project and our wider development portfolio."
"The Kitimat LNG proposal was designed to develop a new source of LNG to supply Asian markets in the latter part of this decade. However, we have decided to prioritise the allocation of capital to opportunities that will deliver nearer-term shareholder value."
"Woodside is focused on working towards the targeted final investment decision for the Scarborough LNG development in Western Australia in the second half of 2021 and the continued successful execution of our Sangomar oil project offshore Senegal."
"Retaining an upstream position in the prolific Liard Basin provides Woodside a low-cost option to investigate potential future natural gas, ammonia and hydrogen opportunities in British Columbia," she concluded.
