Dirty dichotomy: Why Woodside's record profits might have only painted a bigger target on its back

The ASX energy stock is taking heat in the media.

Key points
  • The gas sector has been raking it in this year after a big boost to energy prices
  • Greenpeace and the Greens have been taking aim at the gas industry for its profits and projects
  • But, Woodside is also investing billions into greener energy projects like hydrogen

Woodside Energy Group Ltd (ASX: WDS) shares are under the spotlight as the company earns big profits and takes flak from climate-focused groups.

The business has been making a lot of money recently. The higher energy prices are powering its financials. In the third quarter of 2022, it generated $5.8 billion of revenue, which was up 70% from the second quarter, though this was the first full quarter after the merger with the BHP Group Ltd (ASX: BHP) petroleum business.

Time will tell how much profit Woodside has generated in the six months to December 2022, but it's going to be a large number.

All of this profit is attracting heat, though it has been supportive for the Woodside share price.

Sad looking worker standing next to an oil drill.

Image source: Getty Images

Green criticism

Greenpeace has called Woodside's current development efforts in Western Australia's oceans "the most polluting project currently proposed in Australia".

The organisation also said:

Woodside's Burrup Hub project — which includes the Scarborough, North West Shelf, and Browse projects — would wreck the climate and impact protected marine parks that are home to already vulnerable species.

The leader of the Greens, Adam Bandt, has made numerous comments about the gas sector in prior years and months. The Greens party has a lot more policy clout after its election wins earlier in the year.

In the last few days, Bandt has made claims such as "this is the beginning of the end of gas" in relation to recent legislation to electrify homes.

He also said the gas industry is "price gouging an essential service, climate wrecking drilling, banking obscene profits and often not paying any tax…It's the beginning of the end for gas grifters".

Gas industry defends itself

Unsurprisingly, the gas industry is looking to defend itself amid the criticism, strong profits, and the government's price caps on uncontracted gas.

According to the Australian Financial Review, the Santos Ltd (ASX: STO) CEO said the price caps are "Soviet-style" and will require the government to "guarantee fiscal terms for new projects".

Players in the gas sector suggest there are other policies in the works that could harm the industry, so there could be a "long fight", according to the AFR.

Woodside may also point to the fact that it's investing in new energy projects, not just gas, as it works to play its part in the transition, while also delivering a large amount of gas to customers.

As reported by the AFR, the merger with the BHP petroleum division is seen as transformational by Woodside CEO Meg O'Neill, including helping it fund its greener projects:

It's hard to look beyond Woodside's merger with BHP's petroleum business, which happened in June, as the highlight of 2022.

The merger has been transformational for Woodside, as we now have a larger and more diversified portfolio which is delivering significant cash flow. That means we can fund our committed projects, invest in the new lower-carbon products and services that will support the energy transition, and also maintain returns to our shareholders.

Woodside is reportedly going to spend $5 billion on hydrogen and solar in the US, as well as solar, hydrogen, and ammonia in Western Australia.

Woodside share price snapshot

Over the last month, Woodside shares are down around 9% as energy prices fall. However, they are up 56% this year to date.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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