Fork in the road

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Executive Summary

An aggressive growth strategy over the past five years has delivered increased production for Woodside but not value for investors. The departure of former CEO, Meg O’Neill, is a chance to take stock and consider alternative strategies that could deliver billions of dollars more value.

Since 2020, Woodside has invested in five billion barrels of new oil and gas production, which will increase production by 370% through the 2030s. Despite this, the company has underperformed the sector plus local and global markets. Our analysis shows that Woodside’s four major oil and gas projects which made FID on since 2020 have eroded $3.5 billion^[1] of net present value (NPV).

Woodside’s project hopper shows little cause for optimism. Its pre-FID LNG projects are high cost, its material gas projects uncompetitive, and its largest oil project is immaterial.

Our analysis shows that 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.

Investors can take this opportunity to engage with Woodside’s board on expectations for the incoming CEO.

Now is the time to advocate for a refreshed capital allocation strategy that prioritises shareholder returns over production, including realistic commodity price/project execution assumptions and a justify-in approach to exploration capex.

This refresh would be more effective if supported by a remuneration structure that removes incentives for value dilutive capex or increases in production.

Investors could convey to Woodside that a gradually declining production profile is acceptable if it results in higher value.