Woodside Petroleum cashes in as oil, gas prices lift over 2021

Woodside Petroleum has increased its dividend after a jump in annual profit, cashing in on buoyant oil and LNG prices.

Woodside’s Pluto LNG plant produced at a high rate throughout the year while gas export prices surged over the prior 12 months.

Woodside Petroleum has increased its dividend amid a jump in annual profit, cashing in on buoyant oil and LNG prices – with its pending $40bn merger with BHP Petroleum set to propel the company into a global heavyweight.

The West Australian producer saw its 2021 profit soar to $US1.98bn ($2.75bn), up 149 per cent on the prior year, with its average oil price lifting 86 per cent to $US60.30 per barrel of oil equivalent.

Revenue climbed 93 per cent to $6.96bn with its mainstay Pluto and North West Shelf LNG plants exporting gas to Asian buyers at high levels during the 12-month period, with free cashflow of $US851m.

A final dividend of US105c will be paid to shareholders, a rise on last year’s US12c payout that reflected downbeat conditions after it plunged to a $US4bn loss.

The mega deal with BHP Petroleum will catapult the company into the top 10 producers in the world and radically reshape Australia’s energy sector.

Woodside will own 52 per cent to BHP’s 48 per cent as part of the deal that values BHP Petroleum at $US13.9bn, with the merged company boasting a market value of more than $40bn.

The Perth-headquartered producer will embark on a major strategy shift that will result in it operating on multiple continents with assets spread through Australia, the Gulf of Mexico and Trinidad with the deal to be wrapped up in June, should it pass a May 19 shareholders vote.

Woodside’s bumper annual profit and dividend increase was a “watershed moment” for the Australian energy sector amid expectations fossil fuels would remain a vital long-term cog in the energy transition, Shaw & Partners said.

Woodside chief executive Meg O’Neill. Picture: Woodside via NCA NewsWire

Strong capital returns means Australia’s biggest oil and gas producer has followed the lead of US shale producers and super ­majors, according to the broker.

“Over the past several years, the chorus of investors demanding returns from the sector has grown louder,” the analysts said.

“The US shale sector has responded, the super majors have responded, however the Australian-listed companies have been caught in no man’s land. Woodside’s 2021 (result) today is the first time I can remember since 2014 that an Australian oil and gas company has so comprehensively beaten consensus estimates and at the same time provided a return to shareholders.”

The transition would take more than a generation and prop up fossil fuel producers such as Woodside, it argued, drawing a comparison with tobacco.

Companies in the sector would become “cash machines, in the same way cigarette companies did post advertising restrictions in the 1970s”, they wrote. This would not be the last time we saw “Woodside reporting a double-digit dividend yield and exceeding earnings expectations”.

Woodside chief executive Meg O’Neill told The Australian a recent energy squeeze in Europe and ongoing tensions that have inflated oil prices underscored the importance for Woodside of continuing to invest in new supply. “The world needs continued investment in oil and gas even in that declining [net zero] profile of oil and gas consumption,” she said.

“And there are many other pathways that are Paris compliant that require even further investment in oil and gas.”

Woodside shares rose 4.7 per cent on Thursday to $27.72.

Originally published as Woodside Petroleum cashes in as oil, gas prices lift over 2021