WDS woodside

 WDS

14/07/26

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Over the last decade, ASX:WDS (Woodside Energy Group Ltd) has transformed significantly, shifting from a standalone Australian oil and gas producer to a global top-10 energy player via its 2022 merger with BHP's petroleum arm. Its financials have been highly cyclical, driven by fluctuating global commodity prices. [1, 2, 3, 4]

Very capital intensive company. Like all resource companies, they spend billions developing an asset over the years, only for it to be all gone in the end.

The time to buy this company (and other oil and resource companies) is when in Woodside's case the oil price has collapsed. 

Financial Snapshot

• Profit: Profits peaked in 2022–2023 (post-merger and during the energy crisis) with net profits exceeding US $ 5.7 billion. However, softer oil and liquefied natural gas (LNG) prices have subsequently cooled profits, with recent net income settling to US $ 2.72 billion. [1, 2, 3]

• Debt: Long-term debt grew significantly due to the massive capital expenditure for major projects like Scarborough. Long-term debt reached roughly US $ 19 billion, but the company's debt-to-capital and gearing ratios have stabilized within the disciplined target range of 25-30%. [1, 2, 3, 4, 5]
• Return on Equity (ROE): Due to the heavy capital requirements of major megaprojects and the digestion of the BHP asset base, WDS’s ROE has historically averaged around 4% to 8%. It has recently hovered close to the 7.2% to 8% mark. [1, 2, 3]

The drop in Woodside Energy's (ASX: WDS, formerly WPL) Return on Equity (ROE) to roughly -33% in 2020 was primarily caused by severe multi-billion dollar asset write-downs and a collapse in global profitability triggered by the COVID-19 pandemic

The primary factors driving this decline include:

• Massive Asset Impairments: As the COVID-19 pandemic caused global demand for oil and gas to plummet, Woodside was forced to book massive non-cash write-downs and impairments on the carrying value of its oil and gas assets (including the Scarborough and Browse projects). This resulted in a statutory net loss after tax of over US$4 billion for the year. [1, 2, 3, 4]
• Collapse in Oil and Gas Prices: Global lockdowns and restricted travel brought manufacturing and transportation to a grinding halt. The resulting supply-demand imbalance caused crude oil and liquefied natural gas (LNG) prices to plummet, destroying the company's operating margins. [1]
• Negative Shareholders' Equity Impact: Because ROE is calculated by dividing net income by shareholders' equity, the massive net loss wiped out a significant portion of the company's equity base, further exaggerating the negative percentage return. [1]

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