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Woodside saw a surge in production and revenue this quarter, driven by Sangomar reaching full capacity at the end of 2Q24, though earnings are only reported at half-year and year-end. It was good to see that the company reported capital expenditure for New Energy, with the addition of its Beaumont Clean Ammonia project.

Woodside also announced its delisting from the London Stock Exchange, where depositary interests represent ~1% of its issued share capital. Recent acquisitions in LNG and ammonia raise broader concerns about the company’s transition strategy.

Our view

Woodside's 3Q24 results show that its future is heavily anchored in LNG, with limited flexibility to expand beyond gas + CCS hydrogen in its New Energy portfolio.

At peak, key projects like Pluto 1 & 2 and Louisiana are expected to reach 90% FY23’s oil and gas production. By FY30, we forecast gas and LNG will make up roughly 76% of Woodside’s sanctioned production, up from our previous forecast of 58%. The company’s New Energy strategy is increasingly reliant on the success of third-party CCS services at Beaumont, which will consume 75% of its $5bn New Energy budget. Meanwhile, renewable hydrogen projects have stalled, with the cancellation of H2Tas and ongoing subsidy challenges for H2Ok.

Priority questions ahead of 2025

01 Quantification of levers to decarbonise:

• Will Woodside reduce its heavy reliance on offsets to reduce scope 1 & 2 emissions? Offsets are estimated to cover ~70% of emissions reductions to FY30.

• Why do Woodside’s emissions targets cover only 8% of total emissions? Current coverage does not address growing customer scope 3 emissions. With sanctioned production expected to grow 16% by FY27 and LNG expansion sustaining sales, how will Woodside align its transition strategy with a comprehensive approach to scope 3 reductions?

02 Increases in low-carbon investment:

• How will Woodside’s ammonia project contribute to emissions reduction? The first phase, due in FY25, relies on unabated natural gas, offering no emissions benefit. The 'lower-carbon' ammonia, targeted for FY26, depends on ExxonMobil’s CCS, and the decarbonisation impact for Woodside’s existing customers remains unclear.

• What is the path forward for renewable hydrogen? Following the cancellation of H2Tas and ongoing challenges in securing IRA subsidies for H2Ok, Woodside’s only renewable offering faces uncertainty. With Beaumont consuming the majority of its New Energy budget, how material can renewable hydrogen be, and what is needed to meet its 10% IRR target?

Key takeaways