Woodside Energy (WDS) – Asset shuffle

Woodside Energy (WDS) is an oil and gas producer whose major projects include Pluto LNG, North West Shelf, Wheatstone and Julimar-Brunello, Bass Strait, Ngujima-Yin FPSO, Okha FPSO, Pyrenees FPSO, Macedon, Shenzi, Maddog, Greater Angostura, as well as Scarborough, Sangomar, Trion, Calypso, Browse, Liard, Atlantis, Woodside Solar opportunity, and Sunrise and Troubadour. Woodside was founded in 1954 and is headquartered in Perth.

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Woodside Energy has struck an asset swap deal with Chevron that sees the Australian company receive cash of up to US$400 million ($640million), the US giant's 17% interests in the North-West Shelf (NWS) oil and gas project, and its 20% stake in the Angel carbon capture and storage (CCS)development. In return, Chevron gets the Australian company's 13% stake in the integrated Wheatstone project and its 65% holding in the nearby Julimar-Brunello field.

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Ord Minnett views the deal as strategically sound in terms of simplifying NWS ownership to streamline further development of the project(subject to shareholder appetite for the significant capital expenditure involved in something such as Browse) but considers it to be neutral in company valuation terms. The transaction, which is subject to approval by competition and foreign investment regulators, state and federal governments, pre-emptive rights, and completion of the four-well third phase of the Julimar project, is not expected to be completed until 2026.

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The deal’s effective date, however, will be 1 January 2024.Post the announcement, we make no changes to our CY24 EPS forecast and raise our CY25 estimate by just 0.1%, while our forecast for CY26 (when the deal completes) rises 6% and our CY27 estimate increases 10%.

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Despite the value on offer following recent share price weakness – the stock is down circa 12% since early October – we maintain our Hold recommendation, given execution risk on Louisiana LNG, capital expenditure that will dim the prospects for shareholder returns in the short-to-medium term, and concerns over costs at Senegal and output at Pluto.