The ASX energy share Woodside Energy Group Ltd (ASX: WDS) has suffered a sizeable sell-off in the last month, dropping by 12% since 7 October 2024. That's painful, considering the S&P/ASX 200 Index (ASX: XJO) is largely flat compared to a month ago.
But, when it comes to cyclical businesses like Woodside, a decline could be an opportunity for a brave investor who sees a turnaround.
As the chart above shows, the recent decline is not the whole picture. Since mid-September 2023, the Woodside share price is down close to 40%.
The ASX energy share hasn't been this low since early 2022, just before the Russian invasion of Ukraine.
Can Woodside shares bounce back?
A key reason for the decline has been the decrease in the average realised price for Woodside's production.
In the company's 2024 third-quarter update, Woodside said the average realised price in the first nine months of 2024 was US$63 per barrel of oil equivalent (BOE), down 9% compared to the first nine months of 2023.
A lower realised price in 2024 means less revenue, and it's particularly a headwind for profitability.
However, the latest quarterly update (for the three months to September 2024) did include a number of encouraging signs.
For the three months to September 2024, the average realised price was US$65 per BOE, up 8% year over year and up 5% quarter over quarter. If energy prices keep increasing, then this could be a further boost to Woodside shares. It's certainly possible that with US interest rates coming down and Republicans regaining control of the US, there could be stronger demand for oil and gas.
Second, the business has been growing its production, which can help both revenue and scale benefits. In the third quarter of 2023, production was 53.1 million barrels of oil equivalent (MMboe).
Third, progress continues on Woodside's projects. Their completion will mean the start of cash flow and the end of construction costs.
At the Sangomar project, the ASX energy share said the 24-well drilling program has been completed, and the project has achieved its nameplate capacity of 100,000 barrels per day. Commissioning activities continue to progress as planned, and the start-up of gas and water injection systems is underway.
The Scarborough project is reportedly 73% complete, and the target for the first LNG cargo is in 2026. Installation of the offshore Scarborough gas trunkline was completed in early October.
Woodside also recently completed the acquisition of Tellurian and its development project, which is now called Woodside Louisiana LNG.
My 2 cents on Woodside shares
At this low level, I do think that the Woodside share price could be a medium-term opportunity, with a good chance of a rebound. However, I'd choose to sell if/when it does recover. As we've seen, the stock can be cyclical, so both the good times and bad times may not last forever.
It's currently trading at around 10x FY25's estimated earnings, according to the projection on Commsec.
