Analyst rates Woodside as a Buy

Brokerage Hartleys has started coverage of Woodside Petroleum, rating the oil and gas giant as a Buy as the company gets ready to report its most profitable year ever.

Yesterday the company said it expects its full 2008 year profit to be up to 75 per cent higher on the previous year at around $1.8 billion.

Hartleys analyst Dave Wall said based on current production levels of 81 million barrels of oil equivalent and reserves of 1.688 billion barrels of oil equivalent, Woodside will be producing for the next 21 years.

He estimates that Woodside has made $3.4 billion in cash from its operations in the 2008 calendar year.

"Startup of Pluto 1 Train should see additional revenue of A$1.5b per annum. If resources from Browse and Sunrise are included then revenue of up to A$16b is possible in a US$85 oil price environment within 10-12 years," he said.

Meantime, Mr Wall said he was confident that Woodside will be able to secure extra gas for its second liquefied natural gas train at the $12 billion Pluto project, either through appraisal upside from current reserves, third party gas and exploration success.

"Funding for Pluto and debt levels have been raised as issues; however, we believe these to be of minor concern due to the amount of cash to be generated from the NWS project and from a number of recently commissioned oil projects, as well as divestments options and cash preserved via the dividend reinvestment policy," he said.

"Debt will be harder to raise, but Woodside is well placed."

Mr Wall has given the company a 12-month price target of $44.88 and has forecast a 2008 profit of $1.85 billion before dipping to $1.65 billion the following year.

Shares in Woodside were down $1.56 to $33.20 at 15:32 AEDT.