The Woodside Petroleum Ltd (ASX: WPL) share price closed in the red on Tuesday, down 0.25% to $24.07.
Woodside shares started this week in the green. This came after last Friday's release of the company's Q3 2021 earnings report saw shares sliding 8.5%.
Here we take a look at what's behind this price action and what leading investment analysts are saying on the outlook for the Woodside share price.
What tailwinds are behind the Woodside share price?
Zooming out, we see Woodside shares have been mobilising northwards since mid-September.
This upward trajectory appears to be supported by strengths in the oil spot and futures markets. The liquid black gold has ticked 11% higher since coming off a low on 29 September.
Woodside shares rallied in corresponding fashion, before peaking at $25.46 on 11 October. That was a 6-month high for the company.
The Woodside share price then made a sharp nosedive last week. This came after the company released an update for the quarter ended 30 September 2021.
In its report, Woodside recognised a 19% sequential growth in revenue from the previous quarter to $1.53 billion.
This came on a 2% reduction in total delivered production of 22.2 million barrels of oil equivalent (MMboe) from the previous quarter.
The company also decreased its estimated reserves at Wheatstone, based on reservoir studies from 4D seismic, well drilling, and well performance results.
The down-step in production was undoubtedly offset by hot-running oil prices. Oil realised an average price of $59 per barrel in Q3 – a 28% increase from Q2 2021.
In addition, Woodside confirmed it was "on track" for its final investment decision on the Scarborough and Pluto Train 2 developments before the end of the year.
The company advised that all primary environmental approvals were in place to support the decision. Meantime, commercial agreements are "approaching finalisation" regarding the development.
Perhaps one of the key takeouts from the report was Woodside's intention to merge with mining behemoth BHP Group Ltd (ASX: BHP). The company is proposing to merge the pair's oil and gas portfolio into one consolidated portfolio.
What did the analysts say?
Analysts from leading brokers Citi and Macquarie Group Ltd (ASX: MQG) are treading with extra caution in their analysis of the Woodside share price.
Macquarie appeared to be somewhat startled by the petroleum giant's decision to downgrade reserves at Wheatstone by 27%. This represents around 20% of the total reserves at the project.
The broker believes the downgrade will also shorten the life of the Julimar-Brunello field. It now estimates the field to be depleted in 2032, around 4 years ahead of previous expectations.
Analysts at Macquarie believe the "Wheatstone reserve downgrades were a material negative surprise" to the company's growth outlook.
Meanwhile, fellow investment banking giant Citi has chimed in on Woodside's Scarborough saga.
It noted language used by Woodside throughout its Q3 report may suggest it could expand the Pluto LNG facility and make the final investment decision (FID) on its Scarborough site before it actually sells its stake in Scarborough.
The broker also notes that while Woodside acknowledged both assets in its report, it only mentioned that the Pluto T2 stake is aligned with the FID later this year.
Citi even questions if this is tactical from the company. It sees "a likely scenario where Woodside creates leverage over their shareholders to vote yes on the BHP transaction, by taking FID on Scarborough to Pluto T2 before selling down interests in Scarborough".
So, what's the verdict?
Both teams of analysts decided to trim their targets on the Woodside share price.
Macquarie gave its price target a 5% haircut to $25.90, whereas Citi also downsized its price target by 4% to $22.59.
The Woodside share price is up by more than 30% over the past 12 months. It has climbed just 6% since the start of the year.
