Woodside Energy (WDS)
HOLD

First crack?

 30 Nov 2022
Sector: Energy

FY23 GUIDANCE UPDATE

Need To Knowq

  • FY23 production guidance 180-190 MMboe, below consensus
  • FY23 capex guidance US$6.0-6.5bn, above consensus
  • WDS Investor Briefing Day is tomorrow, 30 Nov.

WDS released updated production and capex guidance for FY23. Production guidance is lighter than the market had expected while capex is above consensus.

  • FY23 production guidance is 180-190 MMboe
  • FY23 capex guidance is US$6.0-6.5bn

FY23 production guidance incorporates first oil from Sangomar (Senegal) in late 2023, a start-up of the delayed Mad Dog (United States) Phase 2 by mid-2023. It also now incorporates a 4-week planned major turnaround at Pluto LNG in Q2 of 2023.

The production guidance is well below consensus of 199 MMboe and is a contrast to the upgraded FY22 production guidance (153-157 MMboe) provided at the 3Q22 production release in October.

WDS had previously indicated major growth project capex of US$9.0bn over a 30-month period. This is now more concisely outlined as US$6.0-6.5bn in FY23 comprising ~20% to Sangomar and ~50% to the giant Scarborough/Pluto Train 2 projects. Project capex can and does move around depending on various aspects, but the market had been expecting a much lower figure (~US$5.2bn) for FY23.

Spot LNG exposure for FY23 is expected to be 20-25% of produced LNG.

Investment Implications

There is certain to be more detail provided at tomorrow’s Investor Briefing Day on these important factors, but the initial data is clearly below what the market had been thinking.

The growth capex on the agenda is a large amount that WDS’s healthy balance sheet can handle. But if other projects such as Trion (GoM) begin to enter the picture, or if WDS fails to sell down its 100% of Scarborough (already more than 16 months trying), then the situation could quickly change. We still believe the dividend payout ratio is liable to be reduced towards the lower end of its 50%-80% range (currently 80%).

Ahead of the anticipated positive story from the Investor Briefing Day, this guidance does not fit the picture. We retain our Hold recommendation.

 

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Stock overview

Share Price

Company overview

Woodside Energy is now Australia’s largest oil and gas producer after its merger with BHP Petroleum on 1 June 2021. WDS producing assets include the North West Shelf, Pluto, Wheatstone, Australian oil and Gulf of Mexico oil and gas.

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