The Woodside Petroleum Limited (ASX: WPL) share price is up after announcing the sale of a 49% stake in the Pluto Train 2 joint venture to Global Infrastructure Partners (GIP).
Pluto Train 2 sale
Woodside explains that Pluto Train 2 is a key component of the proposed Scarborough development and includes a new LNG train and domestic gas facilities to be constructed at the existing Pluto LNG onshore facility.
The estimated capital expenditure for the development of Pluto Train 2 from the effective date is US$5.6 billion.
In addition to its 49% share of capital expenditure, the joint venture arrangements require GIP to fund an additional amount of construction capital expenditure of approximately US$835 million.
If the total capital expenditure incurred is less than US$5.6 billion, GIP will pay Woodside an additional amount equal to 49% of the under-spend.
In the event of a cost overrun, Woodside will fund up to US$835 million for a 49% share of any overrun.
Delays to the expected start-up of production will result in payments by Woodside to GIP in certain circumstances.
The development of Pluto Train 2 is expected to be supported by a long-term processing and services agreement to be entered into between the Pluto Train 2 and Scarborough joint ventures.
Management comments
The Woodside CEO Meg O’Neill said that GIP has impressive credentials and extensive global capability. She also said:
“GIP’s investment will help fund the expansion of the world class Pluto LNG facility. The LNG supplied from the expanded Pluto facility will assist our customers to achieve their decarbonisation goals through the energy transition.
“The sale of the interest in Pluto Train 2 is a significant milestone as we progress towards a final investment decision on our Scarborough development, further de-risking this globally competitive investment.
“The development of Scarborough gas through Pluto Train 2 will deliver significant value to our shareholders, create thousands of jobs in Western Australia and generate tax revenue for decades to come.”
Summary thoughts on the Woodside share price
Woodside seems to be doing the right things for its business and bringing on partners.
I’m not sure if Woodside is a buy today because there are large unknowns relating to resource prices and the impacts of the world slowly turning greener.
I think there are other ASX dividend shares that could be more reliable picks for income.
