UBS: WPL: rates Woodside Petroleum as a Buy 1

Woodside looks cheap compared to Burlington Resources

Event: ConocoPhillips purchase of Burlington Resources

The ConocoPhillips purchase of Burlington Resources is valued at US$35.7bn. This purchase is thought to be driven mainly for its long-lived, US onshore gas resource (around 80% gas). In comparison, we estimate natural gas is around 75% of Woodside's total resource base, located mainly offshore Western and Northern Australia.

Impact: Implies WPL is valued at less than 40% of Burlington

We look at the ratio of company value relative to total resources as one form of measure of the relative value gap that appears to exist between Burlington Resources and Woodside. We think Woodside is valued at less than 40% of what ConocoPhillips is paying for Burlington Resources. Is this justified?

Action: Our Buy 1 rating is maintained

We continue to rate Woodside Buy 1 for ownership of long life quality assets that deliver an exceptional growth profile starting from 2006.

Valuation: NAV A$29.82 based on DCF at 10%

Our Woodside share price target is A$44.11. This is based on our 12 month forward DCF valuation, significant static gas resources and exploration upside (mainly Mauritania).