‘A journey’: Woodside vows to increase oil and gas production in Australia

Key Concepts

• Woodside's Strategic Transformation: A multi-year plan (2024-2032) to increase production and operating cash flow by over 50%, leading to a 50% increase in dividends per share.
• Dividend Policy: Woodside's historical commitment to returning a significant portion (80% of net profit after tax over the last 12 years) of profits to shareholders, particularly valuing Australian franking credits.
• Australian vs. US Listing: A discussion on the advantages of US capital markets (depth, size, lower energy prices, lower corporate tax rates) versus the benefits of remaining an Australian-domiciled company.
• Regulatory Environment: Challenges faced by Woodside in Australia regarding slow environmental and regulatory approvals for projects like Browse, contrasted with faster processes elsewhere.
• Role of Natural Gas: Emphasis on the importance of gas for energy security, national security, and decarbonization in Australia and globally, particularly as a replacement for coal and a enabler of industrial processes.
• New Energy Strategy: Woodside's focus on lower-carbon intensity molecules like hydrogen and ammonia, with a disciplined approach to investment in this evolving market.
• Bass Strait Asset: The acquisition of a 50% stake in Bass Strait through the BHP petroleum merger, with identified opportunities to increase gas production and extend the life of the asset.
• Stakeholder Communication: Woodside's efforts to better communicate its story and the importance of natural gas to politicians and the public.

Woodside's Strategic Vision and Financial Outlook

Woodside is undergoing a significant transformation between 2024 and 2032, aiming to increase its production by 50% and its operating cash flow by over 50%. This growth is projected to enable a 50% increase in dividends per share, with remaining capital available for future growth investments or further shareholder returns. This dividend policy is highlighted as unusual for resource companies, which historically tend to retain capital due to uncertainty in future funding. Woodside has consistently paid out 80% of its net profit after tax over the last 12 years, a practice that has been maintained even during capital-intensive construction phases. The company emphasizes the value Australian shareholders place on franking credits, making it efficient to distribute profits to them.

The Debate: Australian Listing vs. US Relocation

The transcript addresses the temptation for Australian companies to shift their stock market listings to the United States, citing the US capital markets' greater depth, larger domestic market, lower energy prices (approximately one-third of Australian prices), and lower corporate tax rates. Woodside, as one of the world's largest energy companies with significant operations in the US and Mexico, is presented as a potential candidate for such a move. However, Woodside's CEO, Me O'Neal, firmly states the company's commitment to remaining an Australian-listed entity. She emphasizes Woodside's proud Australian heritage, originating in the town of Woodside over 70 years ago, and its deep roots in Western Australia and the Gippsland region. Despite being Australian-listed, Woodside successfully accesses US opportunities, including raising $3.5 billion in the US bond market earlier in the year, demonstrating that its Australian listing is not an impediment to leveraging global capital markets. Furthermore, 75% of Woodside's current revenue is Australian, and Australia will remain a crucial market even as the business transforms.

Navigating the Australian Regulatory Landscape

A significant point of contention is the Australian regulatory scheme for energy companies. The transcript highlights that project approval times in Australia are notoriously slow, particularly for projects like the Browse field, which is still awaiting environmental and regulatory approvals. This slowness is seen as a potential risk of leaving valuable hydrocarbons in the ground. While Woodside is pleased with the approval for the Northwest Shelf Life Extension, challenges persist, including ongoing court cases related to developments. Woodside's message to the government is a clear call to "speed things up" and reduce the difficulty of investing in Australia. This contrasts with jurisdictions in Africa, the United States, Mexico, and Korea, which are perceived as more welcoming to Woodside's capital and presence.

The Strategic Importance of Natural Gas and New Energy Ventures

Woodside emphasizes the critical role of natural gas in the energy system, both domestically and for international energy security. Gas is presented as essential for decarbonizing Australia by replacing brown coal with renewables and gas as a lower-emission alternative that ensures reliable power. The company is also exploring opportunities in new energy, focusing on molecules with lower carbon intensity, such as hydrogen and ammonia. While there are positive policy signals from regions like Europe, Japan, Korea, and Singapore for the use of ammonia in power generation and marine transportation, Woodside is adopting a disciplined investment approach. The focus is on demonstrating value from its recently acquired Beumont new ammonia project and securing high-quality customers before further expansion.

Unlocking Value in Bass Strait

The acquisition of a 50% stake in Bass Strait through the BHP petroleum merger is a key development. Woodside's team has identified opportunities to increase gas production from this asset. The joint venture agreement with ExxonMobil was negotiated to allow Woodside to pursue these opportunities independently. There are approximately 200 petajoules (PJ) of discovered but undeveloped gas in Bass Strait. Woodside will take over operatorship next year, with around 600 ExxonMobil employees joining the Woodside team, bringing with them expertise and identified opportunities to maximize the asset's value. While Bass Strait was projected to run out in the early 2030s, Woodside is cautiously optimistic about extending its operational life and continuing to supply gas to Victoria.

Communicating Woodside's Narrative

The transcript concludes with a discussion on the challenges Woodside faces in ensuring that politicians and the public understand its story and the importance of natural gas. The company is actively engaged in communication efforts, including advertising campaigns, to highlight the role of natural gas in sectors like power, manufacturing, mining, mineral processing, and smelting. This communication journey aims to educate stakeholders on why natural gas is crucial for the profitability of these industries and for the nation's broader economic and technological potential, including the development of sovereign AI capabilities that require large-scale power.