Woodside’s big FY21 result
The Australian petroleum giant reported a big increase in profitability with the release of its FY21 result for the 12 months to December. Here are some of the main numbers:
- Operating revenue up 93% to $6.96 billion
- Net profit jumped 149% to $1.98 billion
- Underlying net profit rose 262% to $1.62 billion
- Operating cash flow doubled to $3.79 billion
- Final dividend of US$1.05 per share
- Full year dividend of US$1.35 per share, up 255%
What drove the result?
Whilst Woodside’s operational performance can be analysed and largely commended, the key is the price of oil.
As a commodity-focused company, Woodside makes money by extracting and selling resources. A higher price for that commodity largely turns into extra profit (before taxes).
Woodside’s realised price per barrel of oil equivalent (BOE) was $60.3, compared to a unit production cost of $5.3 per BOE. Oil prices are rising as the world recovers from COVID impacts. The annual sales volume was 111.6 million barrels of oil equivalent (MMboe).
Therefore, changes in the oil price will have major impacts on the profit and Woodside share price.
Woodside’s CEO said that November 2021 may be the most “remarkable” month in Woodside’s 67-year history with the agreement to merge with BHP Group Ltd‘s (ASX: BHP) petroleum business, as well as the final investment decisions on the Scarborough and Pluto Train 2 projects.
It completed the sell-down of Pluto Train 2 in January 2022.
Woodside has also announced a $5 billion investment target for new energy products and lower-carbon services. Two areas of focus include hydrogen and ammonia.
Woodside provided production guidance of between 92 MMboe to 98 MMboe, excluding the impact from the proposed merger with BHP’s petroleum business. This range compares to 2021’s actual production of 91.1 MMboe.
The 2022 result will largely be decided by what happens with the oil price. For Woodside, there is an $18 million movement in net profit after tax for each $1 movement in the Brent oil price.
It’s planning to invest between $3.8 billion to $4.2 billion in FY22 on its various projects including Sangomar and Scarborough
Final thoughts on the Woodside share price and result
Woodside did the right things to make a lot of profit in this result. Shareholders are going to get a big dividend.
For a commodity business, I think the best time to buy is when prices are low and investor sentiment is low. Oil prices have jumped higher, so I don’t think now is the time to buy. Instead, I’d wait for a lower price. The long-term outlook for oil is also uncertain, the world is planning for commodities like hydrogen to take its place (with Saudi Arabia also planning massive investments).
There are other ASX dividend shares I’d look to for new investments, but current shareholders are getting a big payday.