I think that's something that a lot of people miss @Solvetheriddle - that Woodside made their easy money with the North West Shelf (NWS) and they are now competing against bigger players with much more capital where they do NOT have the advantage, but your point about them being poor operators in terms of execution of their plans profitably - i.e. without massive cost blowouts and providing consistently good returns on invested capital - is also one I have heard before about Woodside. Very patchy track record.

@Bear77 you have probably heard the saying the best way to make a lot of $$ in WA, get a contract with BHP RIO or WDS, lol

@Solvetheriddle thank you for contributing your detailed view on WDS. It is extremely beneficial to read opposing views on any investment I hold as I need to better understand the areas I'm blind to or biased towards so that I can re-assess my thesis and conviction so I am better equipped to evaluate the weighting of an investment in my portfolio. Cheers!

Thank you @Solvetheriddle for your take on WDS. Something you said about “how do you make money in WA? Work with WDS” strung a chord with me. My circles constantly talk about which company to get on with as project workers, discussing who has the most lucrative remuneration contracts and conditions. WDS and Bechtel are consistently mentioned, but I’ll have to determine whether or not that is money well spent (thinking as a part business owner now).

Very interesting point combined with capex risks that both yourself and @mikebrisy have mentioned. As previously mentioned, really appreciate these views and will have a further dive into their projects to see how well their Project Managers are running things. Hopefully a little better than the Sydney Opera House haha.

Hi @tomsmithidg (and @WINGMAN)

Thanks for replying to my earlier WDS straw. I've been quite busy but was mainly waiting for today's results to drop before I commented.

Their profits - $5.6 BILLION (more than doubled on previous year). Oil production at record highs of 13.9 million. 115% increase in NPAT. Fully franked dividend returning a total yield of 11% based off today's close. Nuff said really.

My RL portfolio is heavily overweight in WDS and is the only reason I'm on the fence when deciding if I should buy more. (35%~). I have yet to hear any serious statements about staying away from Woodside.

Hopefully @mikebrisy might chime in here about WDS @pubenvelope as he does have significant experience in that sector. I had another look at my investment thesis for Santos last year after reading some stuff Mike posted here about them, and I changed my own mind and sold out of Santos, and it proved to be a good decision.

I don't want to speak for him, but I reckon Mike ONLY invests in commodity plays like WDS when the sector is completely bombed out and upside is therefore virtually assured, but not when there's clear downside risk.

Spot on @Bear77 - I think sometimes you can know too much about a sector to be a good investor in it!

If I think about the oil and gas sector, in the last 30 years I've only traded in and out of it on about 4 occasions (apart from when I held options and performance shares as part of my employee scheme during my 11 years working in the industry full time from 2003 to 2013.... which by pure luck happened to be a good time).

My last oil investment was "in" during the COVID low (the days after WTI hit -$37) and out about 15 months later. Nice.

I know the SP Chart (below) is only part of the picture, as it doesn't capture dividends, which are a significant part of the $WDS total returns story, but just take a look at the chart of the last 10 years. Very cyclical - you can make a lot of money and lose a lot of money depending on when you make your moves. It is not a long term compounder, by any means. In fact, I think the research shows that the sector as a whole struggles to return its cost of capital over the long term.

I'm not on top of the detail of $WDS at the moment, so am not prepared to give a view on it. I know some talking heads are calling it a "Buy". However, I observe it has quite a significant capex program on at the moment, which is great for the production profile for the next 10 years, but not so great if capex blows out.

Oil prices have traded pretty much in the $70-$80 band for a while, and predicting where that goes from here is a fools game, which is part of the problem, A big part.

FWIW, Goldman Sachs (who I've always rated for their global work in oil and gas, and I worked closely with their London team when I was head of strategy of an international oil and gas company years ago) have a PT on $WDS of $24.50. Despite all the global brainiacs they have working on energy, they don't seee a compelling investment proposition.

I'm not giving advice here (and never am on this forum), but what I will say, $WDS is one of the last places on the ASX I'd be putting my money in at the moment. I'm not saying its going south, I just can't form an investment thesis from here. (Oh, and $STO of course, too!)

Great commentary @mikebrisy. Strawman at its best.

Great post @mikebrisy , thank you. Great to get all the perspectives.

@pubenvelope I hear what you are saying and have the same kind of weighting IRL (which has resulted from buying more as its fallen). It seems to have every major headwind possible on a macro level which overshadows any of this positive performance you mention above. Did I see it dropped 2.7% after it announced the above?

The case for staying away I guess is the real possibility of commodity price depression and the increased risk all the recent capital expenditure brings. Having said that, Ill be holding longer term and even expect it will go under $20 at some point on the journey. Selling at that point would be the mistake - I am OK to collect that 11% and wait the (multi year) cycle out in this case. Am interested to go back though to mid 2021 and isolate what happened to drive the price from 20 to 35 in a short time.

Will focus on my other companies for now which are mostly performing.

Something just out of interest for you - I found these historic numbers from the stockval program I used way back... Would be an interesting exercise to pull these forward to today but like you, will not have the time ATM. The NROE did not look too bad back then !

Thanks for posting @tomsmithidg .

I'm in a similar camp to @WINGMAN in that I have a decent RL position in WDS in my super (mainly as its a LT investment and to take advantage of the extra tax benefits with franking Credits.) ~9% current portfolio size.

I first brought into WDS in late 2020 in the low 20's and I watched the SP rise to the high 30's and thought I was a market timing genius! Only to get smacked in the face with a real life lesson about cyclical companies, and especially how oil & gas companies tend to track the price of their underlying commodity. Unfortunately I didn't sell down some at the top. I must have been in a daze from the increased dividend hitting my account. SMH

Since then I've watched the share price decline slowly as oil prices normalised. However, I focused more on understanding the company more and how they were investing huge amounts into new projects & "quality" assets that will provide increased production from the late 2020's well into the 2030's and beyond! While the acquisition of BHP's oil assets increased their production capacity as well a gain a larger group of assets in the U.S & gulf of Mexico (Sorry, Gulf of America!), my head hurts when I go through their financials and try to make sense of everything in great depth. Unlike @mikebrisy who is extremely informed and experienced in this sector, I have no experience in the sector and therefore my thesis is more a mix of top down (Marco) and straightforward bottom up, without deluding myself with trying to create a DCF or valuation model, when I have low confidence of my projected inputs.

So, my basic thesis is based on the below;

1. The world will continue to increase energy consumption as population grows and 2nd world countries (i.e India and China) continue to have a lower class turn into the middle class and consume more resulting in higher energy needs.
2. The phase out of Fossil Fuels will be incremental and start with coal first, which will take a long time to shutdown, especially in the aforementioned countries. Then the next is Oil, however due to the many areas of everyday life oil is required for production I believe this will take decades not years. I asked ChatGPT to list the everyday products dependant on oil or refined oil and it spat out 75 products across 9 industries including; Energy & Fuel (obviously), Plastics and synthetic products, household products, medical & pharmaceutical, textiles and clothing, transport & manufacturing, electronics and communication, Agriculture & food production, Aerospace & Defense, Sports & Recreation.
3. WDS have had large CapEx spend on recent/current projects, Sangomar (Completed as of last year and now producing), Scarborough (80% complete & targeted for first LNG cargo next year) Trion, which is only 20% complete, targeted for first oil in 2028. This may blow out, however most of the CapEx spend has been made, hence the higher leveraged position of 17.1x
4. To help fund this CapEx program, they decided to sell some of the equity interest in their assets, mainly through the Scarborough Joint Venture (aka SJV), with LNG Japan acquiring a 10% non-operating participating interest in the SJV for $910 million and JERA acquired a 15.1% non-operating participating interest in the SJV for $1.4 billion, which values the asset currently at $9.2b. However as part of the Japan LNG deal, LNG Japan also agreed to reimburse Woodside for its share of expenditures from the effective date of January 1, 2022 and they also entered into a non-binding heads of agreement for the sale and purchase of 12 LNG cargoes per year (approximately 0.9 million tonnes per annum) for 10 years, commencing in 2026.
5. LNG will be the steady & "cleaner" middle ground between Coal & Oil to Renewables, mainly because Nuclear takes so long to come into production (circa 10-15yrs for typical large scale nuclear reactor according to ChatGPT).

Taking into consideration the above 4 points, I believe Woodside is spending now for the future production of increased energy demand via quality assets that will produce increased Cash Flow. Shareholder return via future Cash Flow is why I'm a LT holder of the company and believe the market is being too short term focused on oil price and capex spend.

The company is currently trading at a TTM PE of 8.2x based on FY24 earnings to Dec '24 (they report in Calendar year). For quick value comparison, Occidental Petroleum (US:OXY) a Buffet favourite, is trading on a TTM PE of 21.6! I believe it is good LT value at the current share price.

As a last note, my very basic thesis was coincidentally laid out by Meg O'Neill (CEO) in the following paragraph taken from the results briefing transcript from yesterday....

"In 2024, we made transformative decisions that we are confident will reap future benefits for our shareholders. Through targeted acquisitions and excellence in project execution we are expanding our high quality and geographically advantaged portfolio. We are more than offsetting declining legacy production with new growth opportunities and expect a 4% to 5% compound annual growth rate for portfolio sales from 2024 to 2030. This positions the Woodside of the 2030s to be a business that is even better placed to capitalise on growing global energy demand. The decisions we take today are also positioning Woodside to generate substantial cash flow over the next decade. Following Sangomar start up and as Beaumont New Ammonia, Scarborough, Trion and Louisiana LNG come online, we expect to be generating significant free cash flow in the years ahead. This enables more options to reward our shareholders on top of our established track record of dividend distributions. " Meg O'Neill Feb 25th, 2025.

Disc Held in RL.

Hi @WINGMAN,

Not sure where you're getting -2.7% from, my graphs show that it's up 7.42% this week? (see snap below). I think the market liked what they heard as it realised the business seems to be doing quite well. That market price in 2008 though - wow! Definitely not gone anywhere in 17 years.

I appreciate@mikebrisy for those comments (and @Bear77 for tagging), it's the first real bear response I've heard. I definitely see the cyclical aspect to it as he's pointed out. It doesn't seem to have a compounding share price, but I think it's a safe LT hold for the next decade at a minimum (much better than cash). My strategy is like yours @WINGMAN, I think accumulating at low prices, receiving juicy FF divis and potentially even selling at the 'top' of a cycle down the line is the way to go (just be sure to tell me when we're at the top cause my crystal ball is broken). I would call it my defensive asset. Something to think about though is as long as it is beating inflation + bank deposit rates. I would be upset if my buy price was $37 like it was in 2008.

With my exposure in the renewables/power authority sectors, I just cannot see oil and gas disappearing anytime soon. What the public sees is EVs becoming the new norm, which don't need oil for maintenance, and that really is awesome.. however, those cars that they are replacing take 5L of oil each. What I see everyday is large power transformers taking 100s of Ls of oil each while we perform maintenance. WDS has increased production and profits - are we using more now??

Energy sectors aside, I believe WDS is good company - it's global, has multiple revenue streams, is expanding it's portfolio etc., and that's what I invest in. Very important to keep an eye on the cycle though and ensure that you're not buying after a time of increased SP to maintain a margin of safety.

Share price in the last 7 days:

I thought I'd do a little update on this valuation since I've finally had some time to watch @Strawman 's basic valuation video and started playing around a bit with WDS figures. So I started with a revenue increase of 4% per year for 3 years giving me $23.844 Billion multiplied by a 20% NET profit margin (average over the last 4 years is over 25%) giving me $4.768 Billion. 1.989 billion shares outstanding gives me $2.51 per share. (That figure is definitely realistic as it did over $3.40 per share in dividends in 2023).

So $2.51 x a PE of 16 gives a share price in 3 years of $40.16. Taking that backwards wanting 10% per year gives a share price for today of $30.17.

The 2024 financials provided $3.6 billion in Net profit after tax, and using the current exchange rate $2.87AUD per share of earnings. So $2.87 x a PE of 16 gives a current price for today of $45.92. At a PE of 12x you get $34.44 and at 10x $28.70 (obviously). All of those are comfortably above the current (at time of typing) share price of $26.48.

So there's my first stab at the 'rough and ready valuation'. I'm going to dig a bit deeper and play with the figures some more and do a more in depth analysis soon.

Thanks again @Strawman for the helpful video and the Excel tool. (Yet to try that, I was using the desktop calculator too).

WDS is my biggest holding IRL and on SM.