The Woodside Energy Group Ltd (ASX: WDS) share price is rising on Tuesday.
In morning trade, the energy producer's shares are up almost 1.5% to $35.97 despite a pullback in oil prices overnight.
This compares favourably to a 0.3% gain by the ASX 200 index.
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Why is the Woodside share price rising?
Investors have been bidding the Woodside share price higher today after the company released an update on the Trion resource in Mexico.
This is a highly promising resource in which Woodside has a 60% participating interest.
Today's update reveals that the Woodside board has given the thumbs up to develop the large, high-quality resource. It found that the Trion development has expected returns that exceed Woodside's capital allocation framework targets and deliver enduring shareholder value.
That's despite the development requiring a substantial investment. The release reveals that the forecast total capital expenditure is US$7.2 billion, with Woodside's share coming to US$4.8 billion.
But thanks to its 479 MMboe of best estimate (2C) contingent resource (100%) of oil and gas and oil production capacity of 100,000 barrels per day, the company expects the investment to deliver an internal rate of return (IRR) greater than 16% and a payback period of less than four years.
Woodside advised that the first oil will be targeted for 2028.
Woodside's CEO, Meg O'Neill, appears very positive on the potential of the Trion resource. She commented:
We are developing Trion because we believe it will deliver value for Woodside shareholders and benefit for Mexico, including generation of jobs, taxation revenue and social benefit. We value the ongoing relationship with PEMEX and the support of the Mexican Government and regulators.
ESG-friendly asset
Another positive is that the company believes that the asset is supportive of its ESG credentials. It states:
Woodside believes that Trion is resilient in a decarbonising world, because of several factors including its forecast short payback period of less than four years, the fact that two-thirds of the resource is expected to be produced within 10 years from start-up, portfolio free cash flow resilience in the IEA NZE scenario and it having an expected all-in breakeven less than US$50/bbl.8,9 Trion is expected to have a carbon intensity of 11.8 kgCO2-e/boe over the life of the field, below the global deepwater oil average of 15 kgCO2-e/boe and global oil average of 27 kgCO2-e/boe averaged over the period 2022 to 2032.
