Woodside rating slips on Pluto delay

Delays and cost blowouts at Woodside Petroleum's Pluto LNG project have resulted in international credit ratings agency Standards and Poor's downgrading Woodside's rating to BBB+ from A-.

"In our opinion, further delays and cost overruns for Pluto will hinder a timely recovery in Woodside's credit metrics to levels we expect for the A- rating, especially positive free operating cash glow after capital expenditure," Standards & Pool's credit analyst May Zhong said.

"Furthermore, the project delay means that the gap between completing Pluto and Woodside moving forward with other growth projects may be shorter, providing less time to establish a sustained improvement in cash flow protection metrics."

Standards and Poor's said Woodside's outlook remained stable despite the downgrade, but warned the ratings may be lowered if Woodside experiences further cost overruns, delays or commissioning issues at Pluto.

The outlook anticipates Woodside will return to positive free operating cash flow generation in 2012 and maintain funds from operations (FFO) to debt significantly above 35 per cent once Pluto is commissioned.

"To return to the A- rating, we would expect Woodside to generate sustained positive free operating cash flow for other large development projects in its pipeline," Ms Zhong said.

"We would expect the company to generate sustained positive operating cash flow and FFO to debt above 45 per cent over the longer term."