The ASX energy share Woodside Energy Group Ltd (ASX: WDS) has had a rough time in the first few months of 2025. It's down close to 20% since the start of the year, as the chart below shows. Sometimes, large falls for commodity businesses can be opportunities.
There is no rule that says a drop will turn into a rise, though commodity businesses do tend to have a cyclical nature.
It is not easy to predict what will happen with energy prices, considering the new US administration and how things could play out with the global economy.
I'm going to refer to what the broker UBS thinks of Woodside shares.
Recent quarterly performance
The latest operational update from the company was for the three months to 31 March 2025, so we'll look at that first.
Its quarterly production was 49.1 million barrels of oil equivalent (MMboe), down 4% from the fourth quarter of 2024 because of weather impacts and unplanned outages at Pluto, partially offset by higher production at Shenzi and Atlantis. Quarterly production increased 9% from the first quarter of 2024 because of the addition of Sangomar production.
Quarterly revenue of US$3.3 billion was down 5% from the fourth quarter of 2024 largely because of lower production and lower oil-linked prices. Quarterly revenue was up 13% year over year due to Sangomar starting up in July 2024 and higher gas hub-linked prices.
In terms of project progress, Woodside said it delivered strong execution for the quarter, with all projects on schedule and budget.
UBS said this was broadly in-line with expectations, though production was slightly below expectations because of unplanned outages at Pluto, offset by revenue beating expectations on a stronger sold oil price.
The broker noted that the new Sangomar oil price continues to produce near its expected capacity, though commercial de-risking of major projects remains the key focus. UBS pointed out Woodside has executed a number of LNG contracts, and asset sell-downs and financings, which support the balance sheet and free cash flow profile.
Earlier this week, Woodside announced that it had approved the Louisiana LNG development and signed a gas supply agreement. Woodside's share of forecast total capital expenditure is US$11.8 billion and it's expected to deliver 16.5 million tonnes per annum, with first LNG targeted in 2029.
The new project will help the business deliver approximately 24mt per year from its global LNG portfolio in the 2030s, operating over 5% of the global LNG supply. Woodside is expecting it to deliver an internal rate of return (IRR) of more than 13% and make $2 billion of annual net operating cash flow in the 2030s at full capacity.
UBS view on the Woodside share price
The broker has a neutral rating on the business, though it does see some attraction in the ASX energy share because of its valuation, but its heavy capital expenditure profile is expected to weigh on the free cash flow, as well as a declining dividend profile in the next two years.
Its price target on Woodside shares is $23.20, implying the broker is suggesting a possible rise of around 15%.
UBS is also predicting that Woodside could pay a dividend per share of US 61 cents in FY25, US 53 cents in FY26 and 91 cents in FY27.
