Are Woodside Energy Group Ltd (ASX: WDS) shares an opportunity or have they run too far for S&P/ASX 200 Index (ASX: XJO) energy share investors to buy?
Since the beginning of 2022, Woodside shares have risen by more than 40%. But, since 26 August 2022, they have fallen by around 10%.
It's a bit of a mixed bag in terms of the share price, but it's pretty clear that the company is firing on all cylinders in terms of its profitability.
Result recap
For investors that didn't see it, the company recently reported its 2022 half-year result. It showed that operating revenue increased by 132% to $5.8 billion.
Earnings before interest and tax (EBIT) increased 380% to $2.98 billion, underlying net profit after tax (NPAT) went up 414% to $1.82 billion and NPAT increased 417% to $1.64 billion. Free cash flow surged 688% to $2.57 billion.
The interim dividend per share was increased by 263% to US$1.09 per share.
Woodside benefited from a doubling of the price of oil to $96.4 per barrel of oil equivalent. It chose a fortunate time to merge with the oil and gas division of BHP Group Ltd (ASX: BHP), allowing it to substantially increase in size, adding to scale benefits, diversification and improving its financial stability.
What's going on with energy prices?
Discussing the impact on energy markets around the world, such as the Russian invasion on Ukraine, Woodside CEO Meg O'Neill said:
The upheavals in global and Australian energy markets witnessed over the course of the past six months have shone a spotlight on the importance of gas in the world's energy mix and underscores our confidence in the longer-term demand outlook for gas, which makes up 70% of Woodside's portfolio.
Safe and reliable supplies of gas are not only critical to global energy security but will play a key role as our customers seek to decarbonise, alongside new energy sources such as hydrogen and ammonia that Woodside is investing in.
Is the Woodside share price an opportunity?
Despite the strong performance of energy prices this year, Plato Investment Management's Dr Don Hamson picked the ASX 200 energy share as an opportunity and that it could pay attractive dividends in the coming years. Speaking to Livewire's Ally Selby, he said:
I know it's a bad thing, but it's benefiting from the war in Ukraine because there's a gas shortage and that's going to continue. But even if you look out through those dynamics, we do think decarbonisation is going to be a big thing for the next 30 years, and gas is the interim step. And they're very well placed with that.
I think after they pay their dividend, it's going to be 13% geared. So, it's actually very, very low. And it has a great yield – it's on a yield of 9% gross dividends. So that's one of our favourites.
Woodside has said that its strategy is to be a low-cost, lower-carbon energy provider. It is working on a number of initiatives including "hydrogen refuelling, carbon capture and storage and carbon to products technologies."
