The Woodside Petroleum Limited (ASX: WPL) share price is slipping today.
Shares in the S&P/ASX 200 Index (ASX: XJO) energy giant are down 0.6% to $31.88.
The Woodside share price hit 2-year highs of $34.41 on 7 March, when Brent crude oil was trading at US$128 per barrel.
That same barrel of Brent, up 1.8% overnight, is currently fetching US$100.
Oil prices are being pulled higher by embargos on Russian energy exports while being pushed lower by fears China's COVID-zero policy could see lockdowns like the one in Shanghai – a city of 26 million people – draw out and potentially spread, impacting global energy demand. (Details here.)
But today's downgrade for Woodside isn't directly related to current oil prices or short-term forecasts.
Instead, it's tied in with an independent expert's review of Woodside's merger with BHP Petroleum.
Image source: Getty Images
Why UBS cut its price target
As The Australian reports, UBS reduced its target for the Woodside share price from $34.60 to $32.90, a 5% reduction, while maintaining a neutral rating on the stock.
That came after an independent expert valued the merged Woodside/BHP Petroleum entity at $26.25 to $29.81 per share. This came in 8% to 19% lower than UBS' own estimates.
UBS' new price target on Woodside shares is reportedly higher as the broker ascribes more value to the company's Senegalese Sangomar oil project as well as its Jupiter and Thebe gas fields set to be developed in Western Australia.
Macquarie, which has a $29.50 target on the Woodside share price and maintains its neutral rating, also sounded off on the independent expert's report.
Macquarie said the lower valuation was based on assumptions of lower production and higher costs.
According to Macquarie:
[The] expert's report paints an unfavourable picture of several key Woodside assets pre-BHP Petroleum – reinforcing merits of the transaction. Valuations on key assets Scarborough, Senegal oil, and North West Shelf were all below ours.
Woodside share price snapshot
The Woodside share price has been a big beneficiary of rocketing energy costs.
Year-to-date, Woodside shares have gained 40.5% compared to a 2% loss posted by the ASX 200 so far in 2022.
