One of the leading brokers that looks at ASX shares thinks that the Woodside Petroleum Limited (ASX: WPL) share price is a buy.
Morgans reckons that the business has more upside even though it has already risen by 26% this year.
It has been a crazy couple of years for Woodside.
Just under two years ago the business was tanking as COVID impacts caused a lot of the world's vehicles and planes to limit their movement.
But not only is the world recovering strongly from COVID effects, but the war going on between Russia and Ukraine is sending the oil price even higher. It has soared above US$100 per barrel on concerns about what the flow-on effects will be for oil supply and the oil market in general.
There may be questions about what these higher oil prices mean for the inflation picture, but for Woodside, the market seems to think it will benefit the company with the Woodside share price climbing 14% in this month alone.
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Why is Morgans positive on the business?
Morgans noted that the recent Woodside result showed that underlying profit was a bit stronger than expected.
For readers that didn't catch that result, Woodside reported that net profit after tax (NPAT) jumped 149% to $1.98 billion, whilst underlying NPAT surged 262% to $1.62 billion. Operating cash flow increased 105% to $3.8 billion.
Woodside's realised price was $60.3 per barrel of oil equivalent compared to a unit production cost of $5.3 per barrel of oil equivalent.
The board decided to declare a fully franked final dividend of US$1.05 per share, bringing the full-year dividend to US$1.35 per share.
Morgans also thinks that the merger with BHP Group Ltd's (ASX: BHP) business will be very helpful for Woodside.
Some of the positives of the merger will mean creating a global energy company which would have the cash generation and balance sheet strength to deliver shareholder returns through economic cycles, opportunities to realise ongoing synergies and greater capacity to participate in the energy transition.
Woodside share price target
Morgans thinks it is a buy, with a price target of $30.35.
Based on the projections for FY22, Morgans thinks that Woodside shares are valued at 11x FY22's estimated earnings with a projected grossed-up dividend yield of 6.5%.
