New research: billions of reasons to consider new Woodside strategies

The departure of Woodside’s CEO offers the company the perfect opportunity to explore alternative strategies that could deliver billions of dollars more value for shareholders, new ACCR research finds.

Fork in the road examines Woodside’s pursuit of an aggressive growth strategy across its FID projects since 2020, finding that while the company has increased production, it has not delivered value for shareholders. As Woodside searches for a new CEO following Meg O’Neill’s departure, the report recommends that shareholders engage with Woodside’s board on a refreshed capital allocation strategy that emphasises greater returns.

Key findings include:

• At this point in time, ceasing oil and gas exploration and development would generate almost $3 billion more NPV than a business-as-usual strategy for Woodside.
• Woodside’s four major oil and gas projects – Sangomar, Scarborough, Trion and Louisiana LNG – that reached FID since 2020 have eroded $3.5 billion of value (NPV), despite the projects collectively increasing scope 3 emissions by 2.5 GtCO2e (Woodside’s share of these emissions is 1.4 GtCO2e).
• Woodside has consistently underperformed the ASX100, MSCI World and MSCI World Energy indices across a three-, five-, ten- and 15-year period.
• Woodside has not made a material exploration discovery in 20 years, since Pluto (2005/06).
• Woodside has significantly increased its exposure to LNG at a time when there are risks of oversupply and uncertain demand, which may affect the financial performance of the Scarborough and Louisiana LNG projects.

Commenting on the research, Alex Hillman, Lead Oil and Gas Analyst, ACCR, said:

“Under Meg O’Neill’s leadership, Woodside succeeded in increasing production, but it failed on delivering strong shareholder returns.

“Woodside’s recent projects have eroded value and its upcoming projects look even more underwhelming. Its LNG projects are high cost, its gas projects are uncompetitive and its largest oil project is immaterial. Despite spending half a billion dollars each year exploring for new oil and gas, Woodside hasn’t made a meaningful new discovery in 20 years.

“Woodside has shown that more oil and gas production does not equal more value. With the search for a new CEO underway, now is the time for investors to engage with Woodside’s board on a strategy that increases returns.

“Now is a good time for investors to ask Woodside to recalibrate its investment assumptions and dramatically pull back on its exploration program. Woodside should also stop rewarding executives for production growth that doesn’t also improve shareholder value.

“Investors can drive an honest conversation about Woodside’s sustained underperformance and help prevent Woodside investing in more unattractive projects.”