Do Woodside shares still have more upside to come from the company's BHP purchase?

The 400% profit surge revealed in Woodside's half-year report hints at the value of its newly-acquired BHP assets.

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Key points

  • Woodside completed its merger with BHP Petroleum International Pty Ltd (BHPP) on 1 June
  • That means there was only a single month of production from those BHP assets included in Woodside's half-year result
  • In just one month, those BHP assets delivered almost a fifth of Woodside's total half-year production

Woodside Energy Group Ltd (ASX: WDS) got investors excited this week when it reported a 400% profit surge in its FY22 half-year earnings and tripled its interim dividend for shareholders.

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

The assets it's referring to there are those within the petroleum business of BHP Group Ltd (ASX: BHP).

Woodside completed its merger with BHP Petroleum International Pty Ltd (BHPP) on 1 June. Therefore, there was only a single month of production from those BHP assets included in the half-year result.

But what a contribution.

How significant are the BHP assets to Woodside?

The single month of production from the BHPP assets equated to 9.7 million barrels of oil equivalent (boe) for Woodside, according to its half-year report.

This ended up being 17% of Woodside's total production for the six months to 30 June. In just one month, those BHP assets delivered almost a fifth of Woodside's total half-year production.

Woodside reported total production of 54.9 million boe — up 19% on the prior corresponding period.

It also reported that realised prices for its oil and gas more than doubled to $96.4 per boe across its expanded portfolio of assets.

So, not only is Woodside producing more — with the help of those BHP assets — it's also selling its product for more than double the price.

What will Woodside's production look like for the next half of FY22, when it gets the benefit of six months of production out of those BHP assets?

What did the Woodside CEO say about the BHP assets?

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.

BHP merger provides $400 million in synergies

In its report, Woodside said:

Woodside has delivered synergies of approximately $100 million of the $400+ million per year synergies target, with more than $300 million of further opportunities for synergies identified.

Following completion of the merger with BHP's petroleum business … Woodside's Reserves as at 1 June 2022 increased to 2,339.6 MMboe Proved (1P) Reserves and 3,786.4 MMboe Proved plus Probable (2P) Reserves, with an increase in the Best Estimate (2C) Contingent Resources to 8,682.4 MMboe.

How the Woodside share price responded

The Woodside share price moved up 1.93% on Tuesday — the day Woodside released its half-year report. Not only that, the shares hit a two-year high price of $36.68 in intraday trading.

Yesterday, Woodside shares pulled back by 4.52% to close at $34.25. Potentially, this could have been a result of investors selling the stock to take their capital gains and run.

Woodside has a 30-day average trading volume of 5.36 million shares. On Tuesday, 6.4 million shares were traded. Yesterday, 12.7 million shares swapped hands.

The interim dividend is the largest Woodside has paid since 2014. However, the Woodside share price has only gained 20% in value over the past five years.

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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