Woodside shares were bid down massively during the Coronavirus crash after sustaining a massive blow to earnings. With the share price yet to recover and Woodside entering the exploding Green Hydrogen Sector, is now the time to buy WPL Shares? Should I Buy Woodside shares in 2021?
Woodside Shares Price
We can see that Woodside shares were impacted by the Coronavirus crash and are yet to recover. During the start of 2020 WPL shares plummeted around 60%, down to a low of $14.93. The shares are trading sideways at around $23. WPL hasn’t seen these prices since 2005 with many investors seeing it as an opportunity to pick them up ‘Cheap‘.
Over the last twelve months, the shares are up only 6%, compared to the broader market which has gained 22% and set all-time highs. WPL’s 52-week range is $16.80-27.60.
Woodside Petroleum is a world-class integrated upstream supplier of energy, for over 65 years. Their primary focus is LNG and Oil.
The company has been responsible for leading the development of the LNG industry in Australia.
As Australia’s leading LNG operator, they operated 6% of the global LNG supply in 2020. LNG is a lower-emissions, competitive fuel ideally suited to supporting decarbonization and improving air quality.
Woodside has set clear targets to reduce their net emissions to achieve net-zero by 2050.
Their portfolio includes:
Pluto LNG: 4.9 MTPA LNG capacity, Pluto LNG processes gas from the offshore Pluto and Xena gas fields in Western Australia. Gas is piped through a 180 km trunkline to a single onshore LNG-processing train. Pluto LNG is underpinned by long-term sales agreements with Kansai Electric and Tokyo Gas, which each hold a 5% interest in the project.
North West Hub: Woodside is the key operator of the North West Hub with 16.67% ownership. The North West Shelf (NWS) Project is one of the world’s largest liquefied natural gas (LNG) producers, supplying oil and gas to Australian and international markets from offshore gas and condensate fields in the Carnarvon Basin, off the Pilbara coast of Western Australia.
SCARBOROUGH: 8 MTPA LNG Capacity, The Scarborough gas resource is located offshore, approximately 375 km west-northwest of the Burrup Peninsula and is part of the Greater Scarborough gas fields. They are targetting 2026 as their first LNG cargo.
Senegal Sangomar Field: 100,000bbl/day estimated production capacity. Development in Senegal having achieved final investment decision in January 2020. This development, targeting first oil in 2023, will deliver near-term production. We are also progressing the A-6 Development in Myanmar.
WPL shares typically announce a dividend with the release of its half-yearly results in February and full-year results in August as seen in their financial calendar. Dividends are typically paid twice a year, in March (interim dividend) and September (final dividend).
WPL shares have paid biannual dividends every year since 1991, except for a few years in the early 2000s. This includes the 2008 GFC and COVID recession. WPL shares pay dividends that are fully franked. The current average yearly dividend for WPL shares is $0.5154 giving them a decent yield of 2.25% or a gross yield of 3.21% at the current share price.
After surveying 92 Investors about their current WPL shares sentiment: BUY-HOLD-SELL, as well as their target price over the next 12-months here are the results;
The results from this survey show there is currently a strong BUY investor sentiment on WPL shares. So how much are WPL shares worth? Let’s get into it.
Aligning with the results of the previous full-year WPL realized a net loss, as such EPS was negative at -5.499. Due to this, the PE can’t be calculated. The company has a strong balance sheet giving the group net tangle assets per share of $16.29, meaning 70.98% of the shares price is backed by assets. This makes the price seem relatively attractive.
From previous reports the companies earnings have averaged $1 per share, the previous reported positive earnings were valued at $0.37 (Decemember 2019). Based on these earnings the theoretical PE would be 22.95-62x.
|Volume 4W Avg||2,855,546|
|NTA per Share||$16.29|
In April WPL released its most recent financial results for the first quarter. Here the company highlights revenues up 22% from the previous quarter. Rough weather was to blame for reduced oil productions, but the company realized record prices for their Oil and LPG which largely offset the reduced productivity.
- Achieved sales revenue of $1,121 million, up 4% from Q1 2020.
- Delivered production of 23.7 MMboe, down 2% from Q1 2020.
- Delivered sales volume of 25.7 MMboe, up 8% from Q1 2020.
Preparations for Drilling Campaign mid-2021:
- Ramped up engineering and procurement activities for Scarborough.
- Delivered our first carbon offset condensate cargo.
- Signed a memorandum of understanding with the Government of Tasmania for the proposed H2TAS renewable hydrogen project.
- Executed a sale and purchase agreement (SPA) with RWE Supply & Trading GmbH (RWE) for the supply of approximately 0.8 Mtpa of LNG.
One thing we wanted to point out was Woodside’s entry into the Renewable Hydrogen Sector through H2TAS. This is a space that we have been looking into closely, are considering entering at the right opportunity.
WPL produced a pretty disappointing Income statement. We can see revenues are down from $4.87B to $3.6B, a drop of around 26%. This drop brought gross profits down to only $615M, which after accounting for other expenses and financial costs created a net loss of $3.975B.
The company responded with:
“Our reported loss of $4,028 million reflects major writedowns of our assets announced in July as the COVID-19 pandemic and dramatic oil price plunge created uncertainty in global markets and slashed our revenue.”
You may remember that brief period last year where oil prices went negative. Over the course of 2020 Oil prices were down 35% from 2019, and LPG was also down 37%. Meanwhile, the company realized $44 Million in unanticipated ‘COVID-19 Cost.’
We can see that from 2019 to 2020 total current assets are down 8.5%, with cash and cash equivalents down to $3.6B, from $4B. Liabilities have also increased. As a result net assets have fallen 26% to $12.875B.
Cash Flow Statement
In summary, the short-term downside is likely to prevail as long as $23.2 is resistant. The alternative scenario is that an upside breakout of $23.2 would call for $24.3 and $25.
Here’s A Breakdown Of The Detailed Technical Factors;
Insider Ownership and Trading
We can see that WPL is largely owned by the general public and Institutions at 73.9% and 25.6% respectively. Private Companies own 0.4% and Individual Insiders only own 0.1%, this is a common theme amongst large historic blue-chip companies.
|Number of Shareholders||191,637||73,894||7,422||3,361||117||276,431|
The substantial holders are Vanguard and Blackrock, again this is seen in many of our blue-chip companies;
|Name||Total Shares||Shares Held (%)|
In March of 2021 ex-Chief Executive Peter Coleman sell down 37,822 shares on-market at a value of $952,357. This has been the only activity of insider trading so far in 2021.
Woodside’s Green Hydrogen Play
Woodside is making big moves into the renewable Hydrogen space through their H2TAS space. This is a project we are very bullish about. We talked about the potentials of renewable hydrogen in this article.
Supplying hydrogen to industrial users is now a major business around the world. Demand for hydrogen, which has grown more than threefold since 1975, continues to rise – almost entirely supplied from fossil fuels, with 6% of global natural gas and 2% of global coal going to hydrogen production.
Green hydrogen gives Australia an opportunity to slash our emissions — and if we get this right, the impact could be nothing short of nation-building, argues business leader Andrew Forrest in the first of his ABC Boyer Lectures.Twiggy Forest ABC Interview
Woodside is well-positioned to become a leading provider of Renewable Hydrogen not only in Australia but the world. Through their currently established infrastructure and historic export regulations, namely with Asia, Hydrogen will be a synergetic opportunity for the company. Woodside currently exports 6% of the worlds LNG.
The proposed H2TAS project (H2TAS) is a renewable hydrogen project located in Launceston, Tasmania, Australia. The proposal involves a 10 MW pilot project producing 4.5 tpd of hydrogen for domestic use, targeting the transportation sector. H2TAS participants are Woodside (Operator) and Countrywide Renewable Energy (CRE).
Countrywide is a renewable energy business that develops power generation projects to decarbonize Australia, inject growth into the regional and metropolitan areas and provide sustainable emission-free energy.
Woodside is an energy company that is looking to position itself well into the low-emissions, renewable energy sector through their LNG, and Renewable Hydrogen plays.
WPL also has a lot of work in the pipeline including Scarborough, Pluto 2, and H2TAS. Scarborough once in full production is estimated to produce 8 million tonnes per annum in LNG. This will be one of their largest LNG production facilities behind the prestigious North West Hub, which produces 16.9MTPA.
One consideration for Woodside is its exposure to raw commodities. Being an oil and gas company the company is susceptible to fluctuations in commodity prices. This became evident in 2020 with the crash of oil.
Should I Buy Woodside Shares: Prophet’s Take
In the coming few years Woodside has a lot of projects coming to completion. They have an excellent balance sheet and great opportunities within the Renewable Hydrogen space.
Although the shares price is backed by a large proportion of solid assets, the loss of earnings has severely impacted fundamentals. Even with the return of normal earnings, the current share price would see a PE ratio of around 23x. Given the reliance on commodity prices, we see this as slightly overvalued.
We are bullish on the future of Woodside Petroleum and Renewable Hydrogen and are considering a position of the right opportunity presents itself.
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