Woodside Energy Shares Face Pressure. Here's What Happening.

2 min read | January 17, 2025 11:52 AM AEDT | By Team Kalkine Media

Woodside Energy Shares Face Pressure. Here's What Happening. — Image source: shutterstock

Pressures on Profitability

As a commodity-based business, Woodside's financial performance is heavily tied to energy prices. While production costs remain relatively fixed in the short term, fluctuations in resource prices have a direct impact on net profit.

Over the past two years, Woodside’s profitability has declined as energy prices softened following their 2022 surge, spurred by the geopolitical tensions of the Russia-Ukraine war. For the first nine months of 2024, the company reported an average realised price of US$63 per barrel of oil equivalent (BOE)—a 9% decline compared to the same period in 2023.

The company’s Q3 FY24 update also noted an uptick in realised energy prices to US$65 per BOE, reflecting a 5% quarter-over-quarter improvement and an 8% year-over-year increase, hinting at early signs of recovery.

Reasons for Optimism in 2025

Despite recent challenges, several factors could position Woodside for a rebound:

Energy Prices Rebound: Global energy prices showed an upward trend in late 2024, with Trading Economics data suggesting that Woodside's realised prices may have improved further in Q4 FY24. If prices stabilize or rise, Woodside could see profit growth in the first half of FY25, offering a more positive outlook for shareholders.
Attractive Dividend Yield: Woodside's declining valuation has resulted in a projected fully franked dividend yield of 7.7%, grossing up to 11% with franking credits. This strong dividend potential could make the stock appealing to income-focused investors, providing a solid return amid market volatility.
Project Development: Woodside continues to work on various production-expansion projects, which are expected to improve operational scale and underlying profit margins. These developments may support long-term growth and profitability.

Outlook and Risks

While rebounding energy prices and project developments offer hope for Woodside, risks remain. Profitability is contingent on sustained price recovery, and external factors such as geopolitical tensions and global energy demand could influence market conditions.

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