Woodside Energy Group (WDS) – Green light for Louisiana LNG

Woodside Energy Group is an oil and gas producer with operations across Australia, Asia Pacific, Africa, the Americas, and Europe. The company produces liquefied natural gas, pipeline gas, crude oil and condensate, and natural gas liquids from its projects which include Pluto LNG, North West Shelf, Shenzi, Mad Dog, Greater Angostura, Scarborough, Sangomar and Louisiana LNG. The company was formerly known as Woodside Petroleum and changed its name to Woodside Energy Group in May 2022 when it acquired the petroleum assets of BHP Group (BHP). Woodside Energy Group Ltd was founded in 1954 and is headquartered in Perth.

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Woodside Energy has made the final investment decision (FID) to proceed with the Louisiana LNG project, as widely expected following the part-funding deal struck with US-based infrastructure investor Stonepeak last month that was contingent on FID in the June quarter.

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Project specifications in the FID announcement were in line with previous expectations, i.e. total capital expenditure of US$18 billion ($28 billion), first production in 2029 from the three-train 17 million tonnes per annum project, and Woodside forecasting an internal rate of return of more than 13% using an assumed Henry Hub–Japan-Korea Marker spread of US$6.50 per million British thermal units (mmBtu).

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In Ord Minnett’s view, how Woodside runs its contracting program will be crucial for the project meeting its projected returns given the risk of the LNG market returning to surplus by 2029 as the recent short-term supply crunch washes through the system. We now view the execution and financial risks for Woodside as being more than fully priced into its shares, and we have raised our recommendation to Buy from Hold.

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