Energy

Woodside posts strong 2Q on back of higher energy prices

Thu 21 Jul 22, 10:41am (AEST)
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Key Points

  • Production up 60% on the previous quarter to 33.8m barrels of oil equivalent
  • Average sale price of US$95 boe - more than doubled the US$46 boe a year earlier
  • Revenue up 44% to $3.4bn over the June quarter

Woodside Energy (ASX: WDS) shares opened -1.92% lower this morning despite the newly merged entity with BHP Billiton’s (ASX: BHP) petroleum business announcing a strong second quarter update that saw production up 60% on the previous quarter to 33.8m barrels of oil equivalent (boe).

The company received an average sale price of US$95 per boe - more than doubled the US$46 boe a year earlier - on revenue up 44% to $3.4bn over the June quarter.

Highlights within the quarter included:

  • Woodside's entre into a top 10 global independent energy producer by hydrocarbon production with assets spread through Australia, the Gulf of Mexico and Trinidad.

  • A net cash payment from BHP Group of approximately $1.1bn.

  • Significant progress was made on key projects.

  • First steel for Scarborough’s floating production unit topsides was cut.

  • Accelerated Pluto gas transported through the Pluto-Karratha Gas Plant Interconnector has resulted in additional LNG production and sales of uncontracted cargoes in a high-priced market.

Ongoing developments

Woodside expects to produce between 145m-153m boe for the 2022 financial year and spend between US$4.3bn to US$4.8bn with US$400m- US$500m on exploration.

In an attempt to sell down high equity levels in the development, Woodside advised investors it was ending a sales process for its Sangomar oil project in Senegal.

The company also noted an issue with its Mad Dog phase 2 project in the Gulf of Mexico and plans to update on any delay to the project starting-up in 2022 as more detail comes to hand.

Meantime, Woodside's first big decision as a unified entity will be whether to give the go-ahead on its Trion oil discovery in the Gulf of Mexico, with the company targeting a potential final investment decision in 2023.

What brokers think

Woodside’s share price is up 48.86% over one year.

Consensus on the stock is Moderate Buy.

Based on Morningstar’s fair value of $34.17 the stock appears to be undervalued.

Based on the seven brokers that cover Woodside (as reported on by FB Arena) the stock is currently trading with 7.5% upside to the target price of $35.04.

Intelligent Investor recommends buying Woodside under $28 and selling above $40.

Within a general sector update Ord Minnett has nominate Woodside as its most preferred energy exposure on the ASX, and rates the stock as Buy with an updated price target of $38.05, up from $37.

Early July UBS upgraded Woodside to Buy from Neutral, and with supply availability continuing to tighten the global oil market has lifted its Brent oil forecast to US$104 a barrel in FY22.

The broker has increased its price target to $34.25 from $32.00.

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Woodside's share price over one year.

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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