Woodside Energy Group Ltd (ASX: WDS) shares have come under significant selling pressure over the past 12 months.
Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed down 0.041% yesterday, trading for $24.28 apiece. That sees the stock down just over 29% since this time last year.
For some context, the ASX 200 has gained a bit more than 21% over this same period.
While some investors may still view Woodside shares as a falling knife and one to be avoided until the stock demonstrates a sustained turnaround, Morgans' Damien Nguyen believes the sell-down could offer an opportune entry point (courtesy of The Bull)
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Why now may be a great time to buy Woodside shares
Nguyen, who has a buy recommendation on the ASX 200 oil and gas stock, said:
The energy giant posted record production of 53.1 million barrels of oil equivalent in the third quarter of fiscal year 2024. Third quarter production was up 20% on the second quarter. Revenue of $3.679 billion in the third quarter was up 21% on the previous quarter.
So, why have Woodside shares plunged some 23% in 2024?
"The share price has been under pressure in 2024, driven by external factors rather than company specific issues," Nguyen said.
Which brings us to three reasons he lists to buy shares today.
First, he noted that despite these headwinds, Woodside "retains a low debt level".
At its half-year results, Woodside reported an operating cash flow of US$2.39 billion and a positive free cash flow of US$740 million.
On the funding side, in September, Woodside raised US$2 billion in the US market through a multi-tranche SEC registered bond. The company also converted and upsized an existing US$800 million revolving facility to a new US$1.2 billion 7-year syndicated term loan.
This brings us to the second reason Nguyen has a buy rating on Woodside shares; the company's "strong dividend payouts".
Despite headwinds from falling oil and gas prices, Woodside paid out (a rounded) $1.94 in fully-franked dividends over the past 12 months. That sees the stock trading on a juicy trailing yield of 8.0%.
And the third reason Nguyen is bullish on Woodside shares? The company's "robust earnings quality", he said.
Third-quarter revenue (for the three months through 30 September) was up 21% from second-quarter revenue, coming in at $3.68 billion.
Commenting on that strong performance on the day, Woodside CEO Meg O'Neill said:
Our 39% exposure to LNG gas hub indices allowed us to take advantage of increased LNG spot prices in the market over the period, demonstrating the importance of maintaining a balanced and flexible portfolio.
