Upon closure of the deal with Apache over the three assets, Woodside said its 1P reserves increased by 192 million barrels of oil equivalent to 1.24 billion boe while its 2P reserves increased by 261mmboe to 1.6 billion boe.
Macquarie said these 192mmboe and 261mmboe additions were downgraded by about 10% from previous expectations.
The broker said this occurred when adjusting for the 2 million barrels of oil production from the Balnaves since start-up and the downgrades were due to the removal of "cross block drainage" provisions across the Wheatstone project's Julimar/Brunello fields which were "previously accounted for by Apache".
"While we appreciate that Woodside has taken a more conservative internal view on acquired reserves (as was the case with Oil Search's acquisition of Elk/Antelope [stake] last year), with the project now 57% complete, presumably there should have been less uncertainty surrounding Wheatstone reserves," Macquarie said in its latest underperform-rated report on Woodside.
"Adjusting for the price paid for Kitimat of $US500 million and assuming $355 million for Balnaves (at June 2014), the price paid for Wheatstone in isolation has now grown to $7.5/boe vs our original estimate of $6.8/boe."
"We now estimate that the acquisition price implies $71/bbl to deliver a 10% internal rate of return (after reducing our capex assumption to $33 billion at the recent 2014 results to reflect foreign exchange tailwinds and adjusting for the lower reserves)."
With Woodside booking 15 trillion cubic feet of 2C resources at the Kitimat project in Canada and 40tcf of 3C resources, Macquarie noted that the flagged two train, 10 million tonnes per annum development at this LNG project would need only 10.8tcf of gas for a 20-year contract.
"Furthermore, the 3C case of 80tcf (gross), which is unconstrained by the downstream development proposal, assumes 2500 gas production wells across the Liard & Horn River basins," the broker said.
"Based on a 640,000 acre gross position this implies 250 acre spacing and 32 billion cubic feet per well Estimated Ultimate Recovery.
"While spacing is conservative, the EUR/well assumption appears aggressive."
On the Balnave oil project block WA-49-L, Macquarie saw limited upside.
"After reporting six discoveries in the Carnarvon Basin in 2014, Chevron suggested recoverable resources have grown to 50tcf.
"Conversely, Woodside's 2C resource estimates (excluding Kitimat) points to very little discovered resource surrounding the Julimar/Brunello fields.
"Consequently, while the Ashburton North precinct has approval to accommodate 25mtpa of LNG export, the Wheatstone acquisition seemingly leaves Woodside will little surplus resource to leverage this infrastructure position."
