Company Reports

No-moat hydrocarbon producer Woodside reported first-half 2024 underlying NPAT down 13% to USD 1.63 billion, marginally ahead of our USD 1.55 billion expectations. Underlying earnings exclude a USD 305 million gain on the Sangomar oil project deferred tax asset recognition.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

We increase our 2024 earnings per share and dividends per share forecasts for no-moat Woodside by 7% each to AUD 2.38 and AUD 1.90, respectively, after the Australian hydrocarbon producer provided first-half fiscal 2024 line-item guidance. We have moved to the midpoint of the guidance ranges provided. Our 2024 dividend forecast equates to an attractive 7.5% fully franked yield at the current share price, based on an overall payout of 80%. Our midcycle and AUD 45 fair value estimates are unchanged.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

No-moat Woodside is to acquire 100% of OCI Global’s Beaumont low-carbon ammonia project in Texas for USD 2.35 billion cash. The transaction is targeted for completion in the second half of 2024, subject to OCI shareholder approval. Construction of Beaumont’s first phase is 70% complete and OCI will manage work through to completion. Consideration is inclusive of capital expenditure for phase 1, with first ammonia targeted for 2025.

No-moat Woodside reported a robust second quarter 2024, with production down 1% to 44.4 million barrels of oil equivalent, in line with expectations. Planned maintenance at the North West Shelf was partly offset by higher seasonal demand at Bass Strait and first oil from the Sangomar project in Senegal. Average price achievement was down 3% to USD 60 per boe, as anticipated. Our fiscal 2024 earnings per share forecast of AUD 2.23 stands, as does our AUD 45 fair value estimate. Woodside kept all 2024 guidance, including production of 185-195mmboe and capital expenditure of USD 5.0 billion-USD 5.5 billion. We remain at the midpoint for both.

No-moat Woodside will acquire New York Stock Exchange-listed Tellurian and its wholly-owned Driftwood LNG project on the US Gulf Coast for USD 900 million cash. Subject to Tellurian shareholder approval, the transaction is expected to complete in fourth quarter 2024.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

No-moat Woodside's shares are down 24% from September 2023 highs and, at about AUD 29, are materially undervalued, in 5-star territory. We think the share price is at odds with solid progress being made on growth projects.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

No-moat Woodside reported stronger-than-expected underlying 2023 net profit after tax, down 37% to USD 3.3 billion (AUD 2.63 per share) against our USD 3.0 billion (AUD 2.33 per share) expectations. Lower-than-anticipated depreciation largely accounts for the profit beat, and we see no long-term implication for our unchanged AUD 45 fair value estimate. The weaker 2023 result reflects a 26% decline in average pricing to USD 66.60 per barrel of oil equivalent, easily offsetting a 19% increase in production to a record 187 million barrels of oil equivalent.

Over two months since first confirming merger discussions were underway, Woodside and Santos are walking away with no agreement. The no-moat Australian oil and gas producers have provided little color, save for Woodside reiterating it only pursues transactions when value-accretive for shareholders. Excellent news.

Our AUD 45 fair value estimate for no-moat Woodside stands. The global top 10 independent hydrocarbon producer reported steady fourth-quarter 2023 production of 48 million barrels of oil equivalent, or mmboe, and a higher average price, up 7% to USD 64 per boe. Both were broadly as we expected, and our respective fiscal 2023 EPS and DPS estimates of AUD 2.33 and AUD 1.93 are little changed. The dividend equates to a healthy 6.2% full franked yield at the current share price.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

Woodside and Santos have confirmed that they are in early-stage discussions on a potential merger. We think a merger overall has considerable merit. However, no further details are provided by the no-moat businesses and there is no certainty a deal will proceed. A merger would be unlikely to change our view on the moat rating.

Our AUD 45 fair value estimate for no-moat Woodside stands. The global top 10 independent hydrocarbon producers reported lower-than-expected third-quarter production and price achievement though we read no long-term implication from the fact. Rather we are heartened by reported progress on development projects.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this company's intrinsic value.

As Australia's premier oil player, Woodside Petroleum's operations encompass liquid natural gas, natural gas, condensate and crude oil. However, LNG interests in the North West Shelf Joint Venture, or NWS/JV, and Pluto offshore Western Australia are the mainstay, and the low-cost advantage of these assets form the foundation for Woodside. Future LNG development, particularly relating to the Pluto project, encompasses a large percentage of this firm's intrinsic value.