Woodside share price lifts on 400% profit surge

Woodside has tripled its interim dividend from 30 US cents in 1H FY21 to US$1.09 in 1H FY22.

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Key points

  • Woodside shares opened 3.2% higher after the oil and gas giant released its FY22 half-year earnings
  • Woodside has tripled its interim dividend from 30 US cents a share in 1H FY21 to US$1.09 in 1H FY22
  • On today's exchange rate, this translates to A$1.58 per share to be paid on 6 October

The Woodside Energy Group Ltd (ASX: WDS) share price opened 3.2% higher at $36.50 after the oil and gas giant released its FY22 half-year earnings.

Currently, Woodside shares are trading at $36.02 apiece, up 1.9%.

The company has tripled its interim dividend from 30 US cents a share in 1H FY21 to US$1.09 in 1H FY22. On today's exchange rate, this translates to A$1.58 a share to be paid on 6 October.

The dividend bump follows a massive profit surge, in part due to the merger with the petroleum business of BHP Group Ltd (ASX: BHP).

Let's take a look.

What did Woodside report?

The key metrics in Woodside's results are as follows:

  • Net profit after tax (NPAT) US$1.64 billion, up 417% on the prior corresponding period (pcp)
  • Underlying NPAT US$1.82 billion, up 414% pcp
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) US$3.97 billion, up 165% pcp
  • Earnings before interest and tax (EBIT) US$2.98 billion, up 380% pcp
  • Free cash flow US$2.57 billion, up 688% pcp
  • Operating revenue US$5.81 billion, up 132% pcp
  • Production of 54.9 million barrels of oil equivalent (boe), up 19% pcp
  • Combined realised price of US$96.4 per boe, up 116% pcp
  • Unit production cost US$7.20 per boe, up 47% pcp.

Woodside said the half-year profit surge reflects "strong operational performance, higher realised prices and contribution from the BHPP assets".

According to reporting in The Australian, analyst consensus estimates were core NPAT of $US1.8 billion, revenue of $US5.8 billion, and EBIT of $US2.6 billion.

Citi had forecast a core NPAT of $US1.7 billion, EBITDAX of $US4 billion, and a dividend of US$1.04.

What else happened in 1H FY22?

On 1 June, Woodside completed its merger with BHP Petroleum International Pty Ltd (BHPP).

Realised prices for Woodside's oil and gas more than doubled to $96.4 per boe across the expanded portfolio. This included one month of production from the BHPP assets equating to 9.7 million boe.

Woodside's chief financial officer Graham Tiver said the company now had "significant" operating and free cash flow and a "balance sheet positioned to support major project expenditure".

The interim dividend is the largest interim dividend declared since 2014. The dividend payout ratio is 80% of Woodside's NPAT for H1 FY22.

Woodside said the outlook for gas is "strong and sustained".

The report said LNG markets are "incentivising new global LNG projects as Europe replaces Russian gas".

The report added: "Gaseous fuels remain critical to the energy transition with low-risk and reliable sources advantaged. Asian LNG demand [is] not expected to peak before mid-2040s."

What did management say?

Woodside Energy CEO Meg O'Neill said:

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.

Production for the half year was 19% higher at 54.9 million barrels of oil equivalent, benefiting from the contribution in the month of June of the former BHP assets and improved reliability at our LNG facilities.

In particular, production from Pluto was increased by the start-up of Pyxis Hub and the commencement of gas flows through the Interconnector pipeline to Karratha Gas Plant.

This well-timed investment allowed us to supply three LNG cargoes, one condensate cargo and pipeline gas into a strong market, generating $419 million in revenue and delivering additional value to our shareholders.

What's next?

O'Neill said:

The upheavals in global and Australian energy markets witnessed over the course of the past six months have shone a spotlight on the importance of gas in the world's energy mix and underscores our confidence in the longer-term demand outlook for gas, which makes up 70% of Woodside's portfolio.

Safe and reliable supplies of gas are not only critical to global energy security but will play a key role as our customers seek to decarbonise, alongside new energy sources such as hydrogen and ammonia that Woodside is investing in.

Our strategy to thrive through the energy transition as a low-cost, lower-carbon energy provider continues to progress through recently announced initiatives across hydrogen refuelling, carbon capture and storage and carbon to products technologies.

Woodside share price snapshot

Woodside shares are up 82% over the past 12 months. This outstanding performance from the ASX oil share contrasts with a decline of 7% in the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Bronwyn Allen has positions in BHP Billiton Limited and Woodside Petroleum Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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