Woodside to Hunt for Acquisitions After Leviathan Talks Fail

May 22, 2014 3:25 am ET

(Updates to add closing share prices in fifth paragraph.)

May 22 (Bloomberg) -- Woodside Petroleum Ltd., Australia’s second-biggest energy producer, may step up its hunt for acquisitions after scrapping a deal to buy a stake in Israel’s Leviathan natural gas project for as much as $2.6 billion.

The company is looking at investments of as much as $5 billion and expects to move into new regions this year after entering Myanmar, Ireland and New Zealand, Chief Executive Officer Peter Coleman told reporters today in Sydney after a presentation to investors. The energy producer will look at acquisitions of companies, as well as assets, he said.

Woodside’s lack of growth options have become more acute because of the Leviathan exit, according to Deutsche Bank AG. Oil Search Ltd., Papua New Guinea’s largest oil producer, extended gains for a second day to touch a record amid speculation it’s a potential takeover target.

“Papua New Guinea is a prospective area of the world for us,” Coleman said. “It’s not off the radar screen, but we think it’s pretty fully priced at the moment. We’re not going to chase things that aren’t value accretive.”

Woodside rose 1.2 percent to close at A$41.72 in Sydney trading. Oil Search, which IG Ltd. named yesterday as a possible target after the Leviathan pullout, climbed 1.2 percent to A$9.25, valuing the company at A$13.8 billion.

Woodside Chairman Michael Chaney and his Oil Search counterpart Richard Lee have held informal and inconclusive talks on a potential A$11 billion ($10 billion) deal, the Australian Financial Review reported today, citing people it didn’t name.

Growth Funding

The company has about $6 billion to fund growth, including the ability to raise about $4 billion in debt, Chief Financial Officer Lawrie Tremaine told investors.

The end of the Leviathan deal shouldn’t be seen as a catalyst for a large acquisition, John Hirjee and Hugh Morgan, Melbourne-based analysts at Deutsche Bank, said in a report yesterday. The company is focusing on investing in new projects at an early stage of development, they said.

Woodside plans to invest as it did in Myanmar, where “we got in six months before the rest of the world,” Coleman said. Woodside is interested in oil and gas fields off the Atlantic coast of Africa, he said.

While Woodside considers global expansion options, the company also is committed to returning cash to shareholders as quickly as it can, Coleman said today. Coleman said he will talk to the board about capital management options.

Payment of a special dividend could see A$1.30 a share handed back to shareholders, UBS AG said yesterday in a report.