The Woodside Energy Group Ltd (ASX: WDS) share price reacted positively after the company released its FY22 report to investors yesterday. It went up by around 1.5%.
But, the key question is, are Woodside shares an opportunity after revealing a very strong period of growth?
Earnings recap
Woodside said that its underlying net profit after tax (NPAT) increased by 414% to US$1.82 billion, while free cash flow soared 688% to US$2.57 billion. The interim dividend declared went up by 263% to US$1.09 per share.
The ASX oil share benefitted from higher resource prices during the half-year. However, it also noted that this result was the first reporting after completing the merger with BHP Group Ltd (ASX: BHP)'s petroleum business. Woodside pointed to this move as one that increased financial and operational strength, delivered by a larger, geographically diverse portfolio of "high-quality operating assets".
Woodside also noted that production for the half-year was 19% higher at 54.9 million barrels of oil equivalent. BHP's former assets and improved reliability of its LNG (liquefied natural gas) facilities contributed to this result.
The company's management has confidence in the longer-term demand. Woodside Energy CEO Meg O'Neill said:
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.
Woodside said that 76 cents was an 80% payout of underlying NPAT. This is at the top end of Woodside's target range of between 50% and 80%. Additionally, it paid 80% of the net cash payment received from BHP after completion of the merger, adjusted for a minimum working capital payment.
Is the Woodside share price a buy?
The broker UBS currently rates the resources giant as a buy, though the price target is $33.65. UBS notes that the company's report was largely what the market expected, with a solid-looking balance sheet thanks to a low level of debt.
UBS' profit estimates for the ASX oil share in FY22 mean that the current Woodside share price is valued at 8x FY22's projected profit.
However, one broker less optimistic about Woodside shares is Macquarie, which has a neutral rating on the business. Macquarie's price target is just $28.05. This would represent a fall of around 20% over the next year, if Macquarie's price target came true. The broker suggested that the result and dividend were better than expected.
On Macquarie's numbers, the Woodside share price is also priced at 8x FY22's estimated earnings with a possible grossed-up dividend yield of 13.9%.
