Stock of the day: Woodside Energy

(AI video summary)

This video was created on 29 April for IG audiences by ausbiz.

ASX code: WLP

Woodside advances major LNG development

Woodside Energy has announced it will proceed with its planned Louisiana liquefied natural gas (LNG) development in the United States. The project is scheduled to commence production of 16.5 million tons annually from 2029, representing approximately 68% of Woodside's overall LNG production by 2030. This expansion would position Woodside to produce around 5% of global LNG supply.

The Louisiana project is expected to generate approximately $2 billion in annual net operating cash flow during its first decade of operation. Chief Executive Meg O'Neill described the development as "a game changer" for the company and a positive outcome for shareholders.

Investment considerations and capital requirements

Woodside has forecast that $27 billion will be required to fund the Louisiana project, with the company targeting first LNG output in 2029. Last week, Woodside stated it was assessing the impact of United States tariffs on the project and evaluating whether its location in a free trade zone could provide competitive advantages.

Market reaction to the announcement has been moderately positive, with Woodside shares rising just 1% in today's trading session.

Analyst perspectives on growth potential

Analysts note that this project addresses previous concerns about Woodside's growth trajectory. Prior to this announcement, Woodside's production profile was expected to plateau over the next three to five years, which had been viewed as a disadvantage compared to competitors like Santos with their established pipeline of growth projects.

However, investors should recognise that significant capital expenditure will be required before the cash flow benefits materialise in 2029. Project delivery risks, including potential timeline delays and budget overruns, remain important considerations.

Market observers point out that even successful project execution doesn't guarantee share price appreciation, as external factors such as oil and LNG prices often have greater influence on energy sector valuations.

Energy sector valuation and outlook

Despite these uncertainties, Woodside may represent value for patient investors. The energy sector currently appears relatively undervalued compared to other market segments, particularly following recent oil price declines that have put additional pressure on energy stocks.

Analysts maintain a "hold" recommendation on Woodside, noting that while the company's existing assets generate strong cash flow to support current dividend payments, investors should closely monitor capital expenditure developments for the Louisiana LNG project, as these could significantly impact share price performance in the shorter term.