Woodside (ASX: WDS) shares are ticking higher on Wednesday after the oil and gas major reported better-than-expected third-quarter production and tightened its full-year production outlook.
Woodside shares have struggled over the past twelve months, down 26% to near two-year lows amid falling energy prices and an aggressive growth strategy that's lengthening its heavy CAPEX cycle and placing dividends at risk.
Here are the key numbers for the September quarter 2024.
Record quarterly production +20% quarter-on-quarter to 53.1 MMboe
Record production due to ramp-up of Sangomar, increased up-time across operated assets and increased seasonal domestic gas demand
Quarterly revenue +21% quarter-on-quarter to $3.67 billion, due to Sangomar sales and higher average LNG prices
To add some perspective, quarterly production volume revenue was respectively 2.5% and 6.0% ahead of consensus expectations (54.4 MMboe and $3.46 billion respectively).
Woodside narrowed its full-year production guidance from 185-195 MMboe to 189-195 MMboe. At the midpoint, this represents an increase of 2.2% and marginally ahead of Macquarie estimates (10-Oct) of 189.7 MMboe.
The Group also lowered its full-year CAPEX guidance from $5.0-5.5 billion to $4.8-5.2 billion or a 4.7% cut at the midpoint. Macquarie had forecasted CAPEX of $5.2 billion for 2024.
Woodside's Q3 results surpassed the bullish forecasts of analysts like Goldman Sachs and Macquarie. Quarterly revenue exceeded expectations, bolstered by Sangomar production and unexpectedly high LNG prices.
The full-year outlook is equally promising, projecting above consensus output and a slightly reduced CAPEX. This latter point addresses a key concern for Woodside as it pursues several acquisitions in the US.
In August, Woodside announced its $2.3 billion acquisition of the Beaumont Ammonia Project, with regulatory approval anticipated by year-end. In addition, the company finalised its previously announced $1.2 billion purchase of US LNG developer Tellurian last week.
"Woodside is driving an aggressive growth strategy, and as a result, we forecast a dividend payout cut to 60% in our forecasts is necessary to ensure gearing doesn't run to levels materially above the 20% guardrail," Macquarie analysts said in a note dated 10 October.
"Woodside didn't see this as necessary at the 1H24 result, but with deals now completed, this could change."
Woodside shares have had a lacklustre performance over the past year and declining energy prices are only partly to blame.
The company's recent acquisition strategy has prompted Macquarie analysts to revise their forecasts downward. They've reduced 2024 and 2025 earnings projections by 3% as higher debt raises interest costs. For 2026, they've cut estimates by 10%, factoring in higher interest expenses, increased depreciation and amortisation for Sangomar, and lower anticipated LNG prices.
While Macquarie analysts believe the stock is trading at an attractive valuation, the "elevated CAPEX cycle [is] now effectively locked in for the next 5-6 years is likely to prevent a major re-rating for now."
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