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UPDATE: Woodside 1H24 results - 27 August 2024

In its 1H24 results, Woodside acknowledged that it is reflecting on the 58% vote against its updated transition plan at the April AGM, and is engaging with investors to gather feedback.

In our latest report, 2Q 2024 Results | Climate Transition Insights, we highlighted critical questions for investors to consider when engaging with Woodside during this feedback process ahead of 2025.

Key takeaways:

01

1H24 earnings decline, gearing rises with M&A activity.
Woodside reported 1H24 underlying NPAT of $1.6bn, down 14% from 1H24 primarily due to lower commodity prices. M&A activity surged in 1H24, lifting free cash flow to $740m (up from $314m in 1H23) mainly via Scarborough sell-downs. Net debt rose 67% year-on-year to $5.4bn due to planned capex. Gearing at 13.3% remains within the 10-20% target but is expected to temporarily exceed this range during the investment cycle following the Tellurian and OCI Clean Ammonia acquisitions.

02

Woodside makes largest New Energy investment to date. 
1H24 saw Woodside’s biggest development in New Energy to date, with the announcement of the acquisition of OCI Global's ammonia project in Texas for $2.35bn,10x the amount spent in FY23. This is the first significant move toward its $5bn capex goal for New Energy by FY30.

03

Ammonia acquisition raises questions on Woodside’s ambition.
The OCI Clean Ammonia acquisition raises concerns about Woodside's low-carbon ambition. This transaction represents half of Woodside's low-carbon capex for just phase 1 (1.1 Mtpa). Phase 2 (another 1.1 Mtpa) will require an additional $1.2-1.4bn, totaling nearly 75% of Woodside’s New Energy capex target. At peak, it will produce 2.2 Mtpa of ammonia (~6-7 Mboe), only 3-4% of FY23 production. Emissions impact remains unclear; phase 1 (1.1 Mtpa) by FY25 relies on unabated natural gas, offering no emissions cuts. ‘Lower carbon’ ammonia by FY26 hinges on the success of ExxonMobil's CCS facility to support Linde, Woodside’s primary feedstock supplier.

Woodside 2Q24 results - 23 July 2024

Woodside’s recent acquisition has put New Energy on the sidelines, with Tellurian set to sustain current sales level into the 2030s. We hope to get more details in Woodside’s half-yearly update in August.

Our view

As Woodside takes steps to grow its fossil fuel portfolio, few remain convinced that the company has the capability to transition. The company has no low carbon offerings in its portfolio, and the proposed 5Mtpa of emissions avoided or abated implies minimal ambition for New Energy.

To deliver on decarbonisation, Woodside's transition strategy must move away from the sidelines, where targets are aspirational and highly contingent. Investors should engage on these material gaps:

1) Reliance on offsets. We estimate offsets will account for ~70% of total emissions reductions between Woodside’s FY16-20 baseline and FY30 .

2) Rising scope 3 emissions. Woodside’s transition strategy does not address its growing customer scope 3 emissions, with sanctioned production estimated to grow 16% to FY27, and LNG expansion sustaining sales thereafter. 

3) Unclear value for decarbonisation. Unlike its Australian peer Santos, Woodside does not provide quarterly disclosures for New Energy, making it difficult to track progress against its ambition. FY23 investment must grow 26% on average to meet its $5bn aim, and the proposed 5Mtpa of emissions avoided or abated translates into an expensive and small opportunity. 

4) Emissions targets are not comprehensive, addressing just 8% of emissions.

Key takeaways