Macquarie maintains neutral Woodside Energy stock with AUD26 target

On Tuesday, Macquarie reiterated its Neutral rating on Woodside (OTC:WOPEY) Energy Group Ltd (WDS:AU) (NYSE: WDS) with a price target of AUD26.00. The firm’s analysis indicated that Woodside’s 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) and net profit after tax (NPAT) of US$9.3 billion and US$2.9 billion, respectively, matched Macquarie’s revised expectations. This follows an 18% cut to the firm’s earnings per share (EPS) forecast last week based on the company’s guidance. According to InvestingPro data, Woodside currently trades at a P/E ratio of 15.57 and maintains a market capitalization of approximately $29 billion, with analysis suggesting the stock is currently undervalued based on its Fair Value assessment.

Woodside’s core production costs came in at US$8.10 per barrel of oil equivalent (boe), which was lower than Macquarie’s estimate of US$8.36/boe. The energy company announced a final dividend of US$0.53 per share, totaling US$1 billion, slightly exceeding Macquarie’s and consensus expectations, with a payout ratio of 80%. The company’s gearing, or debt-to-equity ratio, stood at 17.9%, aligning with Macquarie’s projection of 18.2% and within the upper end of Woodside’s target range of 10-20%.

Woodside expressed confidence in its capacity to continue paying strong dividends, with scenario modelling assuming an 80% dividend payout ratio. Macquarie has adjusted its payout expectation to 80% accordingly, noting the company’s significant franking account balance of $1.6 billion. However, the firm also pointed out the possibility of Woodside resorting to dilutive Dividend Reinvestment Plans (DRPs) to cover these payments, which is not currently factored into Macquarie’s estimates. InvestingPro analysis reveals that Woodside offers a substantial 9.17% dividend yield and has maintained dividend payments for 33 consecutive years. Additional InvestingPro Tips highlight the company’s strong dividend profile and financial stability, with more insights available through the platform’s comprehensive research reports.

Regarding major projects, Woodside is making progress with over 80% completion of the Scarborough project, expecting its first liquefied natural gas (LNG) cargo in 2026. Additionally, the Beaumont ammonia project is 83% complete, with the first ammonia expected in the second half of 2025. The Trion oil project is over 20% complete, aiming for its first oil in 2028, and the Louisiana LNG project is on track for a final investment decision (FID) readiness by the first quarter of 2025. Woodside is also evaluating options for Phase 2 of the Sangomar project.

Woodside has maintained its full-year guidance for 2025, with production estimates between 186 and 196 million barrels of oil equivalent (MMboe), which is in line with Macquarie’s estimate of 189.8 MMboe. The company’s cost guidance ranges from US$8.50 to US$9.20/boe, compared to Macquarie’s estimate of US$9.19/boe. Capital expenditure is projected to be between US$4.5 billion and US$5.0 billion, with restoration costs estimated at US$0.7 billion to US$1.0 billion. Woodside anticipates a gas hub exposure of 28-35%.

In its outlook, Woodside projects a compound annual growth rate (CAGR) of 4-5% in sales volume from 2024 to 2030, with a 50% selldown of the Louisiana LNG project. Macquarie emphasized that the timing of project start-ups and ramp-up assumptions will be critical for the company’s performance. InvestingPro data shows the company maintains a moderate debt level with a debt-to-equity ratio of 0.21 and strong financial health metrics, including sufficient cash flows to cover interest payments. For detailed analysis of Woodside’s growth potential and financial outlook, investors can access the comprehensive Pro Research Report, which provides expert insights and actionable intelligence for informed investment decisions.

In other recent news, Woodside Energy Group Ltd released its Annual Report for 2024, detailing its financial performance, including revenue, profit margins, and capital expenditures. The report also highlighted updates on production volumes and exploration activities. Woodside Energy has reached a preliminary agreement with the government of Trinidad and Tobago for the development of the Calypso deepwater gas discoveries, moving the project closer to a final investment decision. Citi analysts upgraded Woodside Energy’s stock rating from Sell to Neutral, raising the price target to AUD24.00, reflecting potential improvements in sentiment as the company progresses with the sell-down of its Louisiana LNG project. BofA Securities also upgraded Woodside Energy’s stock from Neutral to Buy, with a new price target of AUD27.10, influenced by revised oil price forecasts. The company provided an update on the Sangomar Field Development, a key project located offshore Senegal, which is closely watched for its potential output contributions. These developments are part of Woodside’s ongoing strategic initiatives in the energy sector.

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