The Woodside Energy Group Ltd (ASX: WDS) share price is down 60% from its all-time high of more than $66 in May 2008. It has also dropped 33% since mid-September 2023 and has been trading 20% lower since February 2024.
But let's look at whether the ASX energy share could rebound in 2025.
The oil and gas company has suffered amid lower energy prices in recent times. A commodity business's profit is heavily influenced by the price of the resource. Production costs don't typically change much in the shorter term, so additional revenue significantly boosts net profit.
However, a decline in resource prices heavily cuts into net profit.
Woodside's profit generation has fallen in the past couple of years as energy prices drifted lower after the initial jump following the Russian invasion of Ukraine in 2022. In the update for the third quarter of 2024, Woodside reported its average realised price for the first nine months of 2024 was US$63 per barrel of oil equivalent (BOE), down 9% from the first nine months of 2023.
However, there are some positives for the company in 2025 that might excite investors again.
Optimistic reasons to like Woodside shares
The first positive is that energy prices are rebounding. In the third quarter of 2024, Woodside reported its average realised price was US$65 per BOE, up 5% quarter over quarter and up 8% year over year.
There are signs, according to Trading Economics energy price data, that Woodside's average realised price may have increased again in the fourth quarter of 2024. If the energy price stabilises here or goes even higher, then this could allow Woodside to report profit growth for the first half of FY25.
The valuation of Woodside shares has fallen so much that the dividend yield is going to be very high. According to the projection on Commsec, Woodside could pay a fully franked dividend yield of 7.7% and a grossed-up dividend yield of 11%, including franking credits. That would be a solid return just by itself.
Third, the company is working on several projects that, when completed, can help grow its production and boost scale benefits (including underlying profit margins).
Those projects include Scarborough, Trion, and Driftwood. Depending on energy prices, Woodside should be able to generate more profit once completed.
Foolish takeaway
Ultimately, it's better to look at a cyclical ASX share like Woodside when its share price is low rather than when conditions are booming. So, I believe now could be the right time to consider the ASX energy share. But, it's not the sort of business I'd buy to hold forever.
