Woodside Petroleum Ltd.

The stable outlook on Woodside Petroleum Ltd. reflects our view that the company would maintain its ratio of FFO to debt above 45% during benign industry conditions and prior to the next significant phase of development. We also expect Woodside to generate a ratio of discretionary cash flow to debt of more than 15% over the period. During peak project development phases, the rating can temporarily accommodate the FFO to debt reducing to 30% at least, with the expectation that future cash flow and debt reduction restore the company's leverage position in line with the 'BBB+' rating once projects start to ramp up. We could lower the rating if Woodside is unable to maintain FFO to debt above 45% prior

...Woodside Petroleum Ltd.'s improved asset and cash flow diversity underpin its credit quality. The company has completed relatively smaller projects, including: Greater Enfield (oil) project, Greater western flank phase 2 project, and Wheatstone Julimar-Brunello phase 2 development. This places the company on track to achieve its near-term production target of 100 million barrels of oil equivalent (mmboe) in 2020. We regard the cash from the company's established operations as a critical source of funding for its next significant phase of development. Woodside's liquefied natural gas (LNG) portfolio remains highly contracted under medium or long term agreements, which provide cash flow visibility. LNG contracts are linked to oil prices and have embedded take-or-pay arrangements that mitigate some volume risk. However, we note that the company's exposure to spot LNG prices has increased. The proportion of uncontracted LNG that Woodside sells in the spot market rose to about 15%-20% of the...

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