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The Woodside Petroleum Limited (ASX: WPL) share price is slipping into the red as the end of the week draws near.
In afternoon trade, Woodside shares are down 1.3% to $27.72. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is shaking off the geopolitical uncertainty, moving 0.45% to the upside.
Image source: Getty Images
Woodside share price positioned for LNG rise
Oddly enough, the Woodside share price is not reacting positively to Brent crude oil hitting US$100 a barrel last night for the first time since 2014. This milestone was overshadowed by the ongoing attack launched by Russia on Ukraine.
As conflict ensues, Europe fears Russia could weaponise the energy market, cutting off supply to an already constricted market. This follows the scrapping of the 1,230 kilometre-long Nord Stream 2 natural gas pipeline between Russia and Germany.
With roughly 40% of Europe's imported gas coming from Russia, a sudden halt in supply would create a massive shortfall. As such, some analysts believe more upside in liquified natural gas (LNG) prices could be a possibility.
Saul Kavonic, energy analyst at Credit Suisse, believes the Woodside share price could benefit from a supply shock. According to the analyst, there would be a US$940 million revenue boost for each US$10 per metric million British thermal unit (MMBtu) increase in LNG prices.
Furthermore, the local energy producer's new policy to keep ~25% of its LNG on the table for the spot market will mean it has supply readily available to sell into the premium prices.
Should a more severe gas supply shortage in Europe develop, amidst rising geopolitical tensions, Woodside could see a multi-billion-dollar windfall this year.
Saul Kavonic, Credit Suisse
An extra US$3 billion of revenue
In a statement sure to raise the hairs on the back of any Woodside shareholder's neck in anticipation — Kavonic detailed a scenario that would see the company land US$3 billion in additional revenue.
Admittedly, the analyst says it would be unlikely. However, if LNG prices were to reach US$100 per MMBtu, it would provide a breathtaking result for Woodside.
For context, the company recently reported US$6.962 billion in revenue for FY21. The Woodside share price rallied to a new 52-week high on the news.
