UPDATE 1-Woodside sees final decision on Israel's Leviathan in early 2014

Tue Dec 10, 2013 3:08am EST

* Decision on Leviathan seen in first half 2014

* Long-term LNG contracts review to boost prices, earnings

* Woodside currently marketing Browse LNG in Japan

* Plans to sell U.S. Gulf of Mexico assets (Adds analyst comment on LNG contract negotiations)

PERTH, Dec 10 (Reuters) - Woodside Petroleum Ltd said it expects to make a final decision on an investment in Israel's Leviathan field in the first half of 2014, around the time that Israel is likely to finalise its tax policy for gas export projects.

Woodside has made an in-principle agreement to buy a 30 percent stake in the newly discovered gas prospect for $1.25 billion, part of a strategy to diversify outside of Australia that has seen it also eye projects in Myanmar and Ireland.

In October, Israel's top court upheld a government decision to allow about 40 percent of natural gas from the country's offshore reserves to be exported, dismissing arguments that more gas should be earmarked for domestic use.

Israel's finalisation of its tax policy for gas exports, which the company expects within the next 60 days, will add additional regulatory certainty for the project, Woodside chief executive Peter Coleman said.

But he said the company is still working to make sure the commercial case for Leviathan is solid.

"First and foremost we are focused on ensuring that we have a commercial outcome that delivers value to us," Coleman told analysts and reporters in an investor briefing on Tuesday.

Woodside cut its investment expenditure for 2013 to $1.1 billion from $2.3 billion, mostly due to the deferral of spending on Leviathan. It put investment expenditure in 2014 at $2 billion to $2.4 billion.

With the bulk of its long-term LNG contracts under price review, Woodside said it expects the prices it receives for LNG to move toward the Japanese average of around $15 per million British thermal unit (mmBtu). Some of its lowest priced contracts are around $8 per mmBtu, according to analysts.

A jump in prices for some contracts could boost earnings before interest, tax, depreciation and amortisation (EBITDA) and before exploration by more than a $1 billion when the changes kick in, said Citigroup analyst Mark Greenwood.

Other analysts declined to put a dollar figure on potential increases from the price reviews as renegotiations are ongoing, but agreed they would be significant.

"It will be a material increase in price realisation for Woodside at the corporate level," said David Hewitt, an analyst with Credit Suisse.

Woodside, which reported EBITDA before exploration of $5.4 billion in 2012, said it could not comment on any expected earnings rise.

BROWSE SALES

Woodside, the operator of the giant North West Shelf project, is firming up plans for the Browse liquefied natural gas (LNG) project.

Coleman said Woodside was in the early stages of marketing LNG from Browse to customers in Japan, along with joint venture partners Mitsui & Co and Mitsubishi Corp.

Woodside plans to begin front end engineering and design work in mid-2014 and make a final investment decision on the project in the second half of 2015.

Woodside said it is also looking to sell some small assets in the U.S. Gulf of Mexico after selling a 20 percent stake in the Anadarko-operated Power Play field in the Gulf earlier this year.

"We don't have the critical mass there to have a long-term sustaining business... if we can get full value for the assets, then we will make an orderly exit," Coleman said, adding it would provide details on pending transactions early next year.

Woodside narrowed its 2013 production target to 86 to 88 million barrels of oil equivalent (mmboe) from 85 to 89 mmboe previously, and said it was targeting production of 86 to 93 mmboe for 2014. (Reporting by Rebekah Kebede; Editing by Richard Pullin)

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