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Woodside Falls Most in Year After Shell to Sell Stake

  • Shares falls as much as 3.5% in early Australia trading

  • Allan Gray Australia says it boosts stake in the LNG producer

Woodside Petroleum Ltd. fell the most in a year after Europe’s biggest oil company, Royal Dutch Shell Plc, said it would offloaded its entire holding in the Australian liquefied natural gas producer for $2.7 billion.

Woodside shares fell as much as 3.5 percent in intraday trading on Tuesday to A$31.10 ($23.74), and changed hands at A$31.19 at 11:51 a.m. in Sydney. Shell said it would sell an 8.5 percent stake in Woodside at A$31.10 a share, a 3.5 percent discount to Woodside’s closing price on Monday. The Anglo-Dutch company then expanded that sale overnight to exit its remaining 4.8 percent holding.

Woodside shareholder Allan Gray Australia, which has A$5 billion of funds under management, said it boosted its stake on Monday in the Perth-based company and continues to see strong opportunities in the under-valued energy sector.

“The energy sector is one of the very few asset classes that remains very depressed relative to history,” said Simon Mawhinney, chief investment officer of Allan Gray. “In an environment where all other sectors have experienced significant price inflation, it’s this sector where we see the best relative value.”

The sale price represents a 20 percent premium to its A$26 a share discounted cash flow valuation for Woodside, RBC Capital Markets said in a research note. “We therefore consider the sale price to be a strong result for Shell,” RBC analyst Ben Wilson said.

Shell became a shareholder in Woodside following a joint investment in the North West Shelf consortium in the early 1960s. In 2000, it sought to take over the entire company, a move that was blocked by the Australian government the next year. At the time, Woodside ran Australia’s only LNG plant, the North-West Shelf, and the government was concerned Shell would slow Woodside’s expansion by prioritizing other investments in Asia.

Crude’s slump pushed Woodside shares down 21 percent in Sydney from the beginning of 2015 to mid-2017. The stock rallied 5.6 percent in October and is up 1.4 percent this month as oil rebounds.

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