Woodside posted bumper profits on Monday. Where does Macquarie stand on the stock?

Woodside Limited (ASX: WDS) released its first-half report on Monday, posting record profits up over 200% year-on-year (YoY). 

This is the first report Woodside has released post-merger with BHP Petroleum. 

A quick-bite summary of Woodside’s 1HFY23 results shows the following.

Quick bite:

Reports full-year 2022:

• Revenue of US$16.8bn, up 142%

• Net profit of $6.5bn, up 228%

• Underlying net profit of US$5.23bn below US$5.56bn expected 

• Final dividend of US$1.44 per share (ex-dividend March 9th)

FY23 Outlook:

• Production guidance of 180-190MMboe

• Capital expenditures of US$6.0-6.5bn

• Woodside’s gas hub exposure guidance for the portfolio, as a percentage of produced LNG, is 20 – 25%

The Scarborough gas project is still set for Liquefied Natural Gas (LNG) in 2026.

Where does Macquarie Stand?

In a first-pass read of the result, Macquarie Bank released its stance on the stock in the early afternoon on Monday. 

Macquarie has rated Woodside as NETURAL, with a price target of $36.00. 

As at 2:00pm AEST Monday 27 February 2023, the WDS share price is up 1.50% to $35.12.

Using the price of $35.12, this reflects a total increase of 2.5%.

Why is Macquarie cautious? 

The bank was quick to point out that while net profit was up 228% to US$6.2bn, underlying profit was lower at US$5.2bn. 

That underlying profit read was actually below expectations of US$5.56bn. 

This was a similar case for EBITDA. At US$11.2bn, it was -8% below expectations of US$12.1bn, despite being up 172% YoY. 

This wasn’t enough to see Macquarie rate WDS with a BUY. 

“This [EBITDA] miss was driven by significantly higher royalties and slightly higher production costs,” analysts wrote. 

“Realised pricing increased 61% to US$98 per barrel of oil equivalent, which supported growth in free cash flow to US$6.5bn in 2022.” 

Much of that realised pricing boost has to do with energy shocks borne from Russia’s invasion of Ukraine in February last year. 

Brent Crude prices continue to retain a floor in the low US$80/bbl range, per TradingEconomics data. 

The bank also noted that Woodside’s overall hydrocarbon reserves were “just a little below our expectations.” Woodside believes it has 3.6bn barrels of oil equivalent altogether. Barrels of oil equivalent is used to describe oil and gas together. 

Woodside's five year performance chart versus the ASX100 over the same period