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Woodside Energy (Baa1, BBB+, BBB+) Ammonia Acquisition

CREDIT UPDATE
  • Woodside Energy, Australia’s largest energy producer, will acquire OCI Clean Ammonia for $2.35b from Dutch company OCI NV. Equities have reacted poorly, off over 5% today, and is down about 15% from the July highs.
  • The clean ammonia plant in Texas is under construction and expected to start producing in 2025, will eventually produce lower-carbon ammonia.
  • This deal is Woodside’s second major US acquisition in less than two weeks, following its $900m agreement to buy liquefied natural gas developer Tellurian Inc.
  • Analysts have expressed concerns about the impact on Woodside’s financials. They predict that the company's free cash flow could decline significantly, with potential drops to $200m this year and $100m by 2025. Additionally, there is speculation about a possible negative effect on dividends, especially if the company’s gearing approaches the upper end of its target range.
  • The WPLAU curve is currently slightly inverted, there is an upcoming maturity of the WPLAU 25s, while the 28s & 29s trade with a yield of 4.75%.
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