Woodside: WDS

[kiwi2007]

Is the Woodside share price a buy for its 13% dividend yield? (or even 18% yield)

*Dividend expectations

The broker Ord Minnett thinks that at the current Woodside share price, it's going to pay a grossed-up dividend yield of 13.6% in FY22 and then 8.6% in FY23.

Macquarie believes that Woodside could provide a grossed-up dividend yield of 15.3% in FY22 and 8.1% in FY23.

One of the biggest estimates of all comes from Morgan Stanley – it's predicting that Woodside will pay a grossed-up dividend yield of 18% in FY22 and 16.4% in FY22.

By most accounts, those yields are big.

www.fool.com.au/2022/06/24/is-the-woodside-share-price-a-buy-for-its-13-dividend-yield/

[Plata]

Yeah certainly pretty interesting. Especially if you believe the idea that recent underinvestment in O&G development will continue into the future and thereby elevate prices. Not sure where I sit yet.

[nztx]

Anyone see Dinosaur fuel / byproducts not being used in near / medium future ?

Factor in the BHP O&G assets thrown into WDS

I'm in - div looks robust, as do future prospects

Rather prefer prospects with WDS over BHP  and RIO.


Try also Whitehaven Coal - WHC - last result increase from $200 m to $3.0 Bills

Dirty old coal - but what sort of stakeholder rewards are going to be given out
off that sort of results soon ?

[kiwi2007]

First Aussie LNG carrier for 6 years arrives in the UK
https://www.edenmagnet.com.au/story/7871396/nervous-uk-welcomes-australia-lng-shipment/?cs=5461

[arekaywhy]

Anyone see Dinosaur fuel / byproducts not being used in near / medium future ?

...

Dirty old coal - but what sort of stakeholder rewards are going to be given out
off that sort of results soon ?

This interests me bigly.

It is physically impossible for the West to wean itself off fossil fuel, and don't get me started on the folly of electrical cars.

I only started paying attention to Woodside with the BHP interest.

[Hectorplains]

This interests me bigly.

It is physically impossible for the West to wean itself off fossil fuel, and don't get me started on the folly of electrical cars.

I only started paying attention to Woodside with the BHP interest.

Agree - hence where the price of coal is at.  There's plenty of fun to be had playing the small end of town too on this one.  Whitehaven's share price may have more upside to give but not the multi bag potential of some of the minnows (albeit totally dependent on your risk appetite.)

[kiwi2007]

https://finance.yahoo.com/news/woodside-energy-triples-dividend-first-230028870.html

Woodside Energy Group Ltd more than tripled its interim dividend payout on Tuesday after the Australian gas producer posted a five-time increase in first-half profit on booming oil and gas prices.

LNG prices have soared as sanctions on Russia after its invasion of Ukraine have worsened supply issues in an already tight market, leading buyers from Asia and Europe to seek alternative suppliers, benefiting producers in countries such Australia and Papua New Guinea.

Woodside, among the top 10 global independent oil and gas producers after its merger with BHP's petroleum arm, announced an interim dividend of $1.09 per share, a more than three-fold increase on its last year's payout of 30 cents a share.

"Our first results since the completion of the merger with BHP's petroleum business highlight the increased financial and operational strength delivered by our larger, geographically diverse portfolio of high-quality operating assets," Chief Executive Officer Meg O'Neill said.

Woodside posted an underlying net profit after tax, excluding one-time charges, of $1.82 billion compared with a profit of $354 million a year earlier.

The profit for the six months ended June 30, beat estimate of around $1.49 billion, according to Visible Alpha.

Australia's biggest independent gas producer said it expects exploration expenditure of $400–$500 million in fiscal 2022.

[kiwi2007]

Recommendation impact (last updated: 30/08/2022) MorningStar
--

Event analysis
Woodside's First-Half 2022 Shines With Better Still to Come

We make no change to our AUD 43.00 fair value estimate for no-moat Woodside. The global top-10 independent hydrocarbon producer reported a better-than-expected 414% increase in underlying first-half 2022 net profit after tax to USD 1.82 billion, 13% ahead our USD 1.62 billion forecast. Woodside also paid its largest interim dividend since 2014, up 271% to AUD 1.52 per share, a shade below our AUD 1.54 forecast, equivalent to a healthy annualised 8.5% fully franked yield at the current share price.

However, we read no implication for our midcycle estimates. Profit outperformance against our expectation reflects a lower-than-expected interest rate and lower net debt balances on which that rate was calculated. Lower net debt levels reflect strong cash conversion, cash balances transferred from BHP Petroleum, and net asset sale proceeds. The interest rate was 1% versus 2.8% in the PCP, while Woodside received a completion payment of USD 1.08 billion for the BHP Petroleum merger and an additional capital contribution from Global Infrastructure Partners for Pluto Train 2.

Despite this, our 2022 EPS forecast drops slightly by 5% to AUD 5.33 after we increase operating cost expectations given inflationary conditions in the industry currently. Woodside guided for 2022 production of 145-153 mmboe and we're at the extreme upper bound, confident all stops will be pulled out to maximise production for a ravenous market. Our 2023 EPS forecast rises 9% to AUD 5.42 given rises in Brent crude and Japan Korea Marker LNG futures since our last research report. The JKM recently hit an eye-watering USD 70/million Btu, a far cry from sub-USD 2.00/mmBtu lows during 2020's pandemic nadir.

Our 2022 DPS forecast decreases 4% to AUD 4.00, but our 2023 forecast increases 9% to AUD 4.33, mirroring EPS moves. These equate to fully franked yields of 11.2% and 12.1% respectively at the current share price. But much will depend on the trajectory of energy prices, which will likely be volatile.

[kiwi2007]

(Alliance News) - Uniper SE and Woodside Energy Group Ltd on Monday said they signed an agreement to supply up to 800,000 tonnes of liquefied natural gas per year to Europe.

German energy company Uniper has signed an agreement with Australian energy firm Woodside, which will see Woodside supply LNG to Europe from January 2023 up to 2039. The firms emphasise that the deal will supply Germany, which has no LNG ports. In July, the country announced it plans to finish building a floating LNG terminal by the end of 2022.

[kiwi2007]

From MorningStar..

Market Underestimates Earnings Resilience Coming via Growth Projects and Domestic Gas Stability.

ecommendation impact (last updated: 10/10/2022)
--

Event analysis
Market Underestimates Earnings Resilience Coming via Growth Projects and Domestic Gas Stability.

Woodside, Santos, and Beach Energy have all benefited from rising oil and gas prices. However, despite share price appreciation, we think value still exists. And if energy prices remain elevated for longer than expected, value may be even greater. That's possible given the energy crisis in Europe. Of the three Australia-based oil and gas producers we cover, Woodside has the greatest exposure to global prices and has benefited the most from international events. For Woodside, only about 20% of production is attributable to domestic gas, where prices are steadier. Beach by contrast has about 60% of production serving the domestic gas market, while Santos sits between those two at about 40%. Domestic gas has a number of positives, with capital intensity lower than for export gas, and pricing under term contracts with consumer price index escalators. But lower margins and shorter field lives mean Beach is potentially more exposed to operating and capital cost inflation with less of the commensurate export pricing upside that Santos and especially Woodside enjoy.

Santos trades at a near-40% discount to our fair value estimate, the market underpricing for Barossa gas and new oil project growth. Realised prices are below those for Woodside, but margins are comparable. Santos has longer field life and stronger production growth than peers and a still comfortable balance sheet. Returns were spoiled by cost overruns last decade. But new investments under the watch of CEO Kevin Gallagher have generated attractive returns.

Woodside shares trade at a circa 25% discount to our fair value estimate, insufficient credit being given for Scarborough/Pluto T2. Strong realised prices reflect a favourable product mix and comparatively higher spot exposure. Returns on invested capital are tempered by liquid natural gas capital expenditures, including for Scarborough/Pluto T2. But returns should improve upon T2's start up in 2026.

DPS 22 - A$383.3 EPS 528
DPS 23 - A$271.8 EPS 464
Source: Aspect Huntley analyst estimates.

[kiwi2007]

A cracking third quarter from Woodside.

https://www.woodside.com/docs/default-source/asx-announcements/2022/third-quarter-2022-report.pdf

[kiwi2007]

From MorningStar...

Despite the favourable metrics, we lower our 2022 and 2023 EPS forecasts by 5% and 6% to AUD 4.98 and AUD 4.39, respectively. A softening in the futures curve for JKM (Asia LNG) is chiefly the cause. JKM averaged USD 47 per mmBtu in the third quarter and hit a peak above USD 70 per mmBtu. But futures have recently retreated to an average near USD 35 per mmBtu for 2023. Woodside sold 24% of third-quarter produced LNG at prices linked to hubs like JKM. Hub price volatility associated with Russia's invasion of Ukraine is likely to continue to result in a rollercoaster for earnings, albeit from exceptionally high levels. Our AUD 4.98 2022 Woodside EPS forecast is nevertheless 620% above mid-pandemic 2020 levels.

Woodside has increased 2022 production guidance to 153-157 mmboe from 145-153 mmboe prior. We hold at a 155 mmboe estimate—we'd already assumed that all stops would be pulled to maximise output for a ravenous market.

[kiwi2007]

From Morningstar:
Record 2022 Dividend and No-Moat Woodside Is Well-Positioned for Growth Expenditure

We keep our AUD 44.50 fair value estimate for no-moat Woodside. The global top 10 independent hydrocarbon producer reported a 220% increase in underlying 2022 net profit after tax to USD 5.2 billion, slightly ahead of our USD 5.1 billion expectation. It declared a 37% increase in final dividend to USD 1.44, ahead of our USD 1.37 expectation, on a 73% payout. It brings the full year to a record fully franked USD 2.46 (AUD 3.75) on a 74% payout, for a hefty 10.8% yield at the current share price.

We slightly rein in our 2023 EPS and DPS forecasts, by about 4% to AUD 2.42 and AUD 1.94, respectively. Softening Japan Korea Marker, or JKM, (spot Asia LNG) futures are the key detractor. Woodside says it will sell 20%-25% of equity LNG volumes on hub indexes such as JKM in 2023, close to 2022's 23% actual. JKM futures have softened in recent months to back below USD 20 per mmBtu, including an average of USD 16 per mmBtu for the balance of 2023. LNG comprises just over half of Woodside's sales revenue. Hub price volatility associated with Russia's invasion of Ukraine has led to a rollercoaster for earnings and dividends, and may continue to do so.

Our AUD 1.94 2023 DPS forecast equates to a fully franked yield of 5.3%, back from rarefied 2022 levels, but healthy nonetheless. We assume an 80% payout ratio, at the high end of Woodside's 50%-80% target range. There is the possibility the ordinary payout could be reduced in preference for specials and/or share buybacks, acquisitions notwithstanding.

Woodside hasn't changed 2023 production guidance of 180-190 mmboe, a 20% increase on 2022 including a full period's contribution from the merged BHP Petroleum assets. We sit at a high-end 190 mmboe. Exploration and development expenditure guidance is for USD 6.3 billion-USD 6.9 billion, more than double 2022 levels and around half of which is for Scarborough and Pluto Train 2 (now 25% complete and on track for first production in 2025). We sit at the midpoint of USD 6.6 billion.

2023 Dividend forecast down dramatically from Morningstar's August forecast.

[kiwi2007]

Worth looking at the analysts questions on the investor briefing:

"When we look at the free cash flow profile on
slide 25 relative to what was presented 12 months ago, 12 months ago you were forecasting US$4 billion of
free cash flow in 2024, and it now looks more like break even and when we look at that terminal free cash
flow level, now at around US$5 billion per annum out in 2027-28 versus more like US$7 billion 12 months
ago, it looks like that free cash flow profile has stepped down materially. On my numbers, it's around $7
billion lower free cash flow over the next four years. " ??

and

"Just a quick
question if I can on slide 26, the sources and uses of cash. We can squabble about over the shading, but to
make the maths easy, let's say that underlying dividend at 80% payout ratio there's about, it looks like,
US$6.5 billion over that five-year period. That equals US$1.3 billion a year. That's a 3% dividend yield. I
guess when we compare that to the slide you put on page 76 looking back at the prospective 12-month
dividend, you're up near the top, but 73% is down near the bottom. As a Board, do you think that at $70 oil
paying a 3% dividend is competitive enough"


hxxps://www.woodside.com/docs/default-source/asx-announcements/2023-asx/investor-briefing-day-2023-transcript.pdf?sfvrsn=e6487897_3

Doesn't fill me with enthusiasm.

[Hectorplains]

Worth looking at the analysts questions on the investor briefing:

"When we look at the free cash flow profile on
slide 25 relative to what was presented 12 months ago, 12 months ago you were forecasting US$4 billion of
free cash flow in 2024, and it now looks more like break even and when we look at that terminal free cash
flow level, now at around US$5 billion per annum out in 2027-28 versus more like US$7 billion 12 months
ago, it looks like that free cash flow profile has stepped down materially. On my numbers, it's around $7
billion lower free cash flow over the next four years. " ??

and

"Just a quick
question if I can on slide 26, the sources and uses of cash. We can squabble about over the shading, but to
make the maths easy, let's say that underlying dividend at 80% payout ratio there's about, it looks like,
US$6.5 billion over that five-year period. That equals US$1.3 billion a year. That's a 3% dividend yield. I
guess when we compare that to the slide you put on page 76 looking back at the prospective 12-month
dividend, you're up near the top, but 73% is down near the bottom. As a Board, do you think that at $70 oil
paying a 3% dividend is competitive enough"


hxxps://www.woodside.com/docs/default-source/asx-announcements/2023-asx/investor-briefing-day-2023-transcript.pdf?sfvrsn=e6487897_3

Doesn't fill me with enthusiasm.

I doubt this will either then...