What to Expect From Australia's Energy Titan Woodside's Upcoming Earnings Report

Woodside Petroleum appears well-positioned for sustained long-term earnings expansion, driven by increased production volumes amidst rising LNG ( liquefied natural gas ) demand in Asia and a global shift away from Russian energy sources. The company's strategic merger with BHP's petroleum division, concluded in June 2022, is expected to augment production volumes, which are projected to reach 190 million barrels of oil equivalent (mmboe) in 2023, up from 157.7 million in 2022.

The potential divestment of a portion of its interest in the Pluto Train 2 project is anticipated to provide substantial liquidity, which could be allocated to advance other growth-oriented initiatives. Additionally, the company's financial health has shown marked improvement, with net debt reducing to a mere 1.5% of equity at the close of 2022, compared to 26.5% in the preceding year.

However, there is a possibility of increased financial leverage, given the planned capital expenditures estimated between $6 billion and $6.5 billion for 2023. These expenditures are earmarked for further gas development and initiatives supporting the company's transition to clean energy. In light of these significant investments, it is crucial for management to maintain rigorous cost discipline and prudent capital management to ensure sustained financial stability and value creation for shareholders.

Woodside Energy anticipates a significant drop in its annual earnings amid global oil market volatility. As declining oil prices threaten their financial stability, stakeholders are on alert for the upcoming announcement.

The Australian energy producer's earnings are sensitive to oil price shifts. Every $1 drop in WTI crude could result in a 2.7% decline in net income, according to Bloomberg's analysts' suggestions. Global oil supply and demand remain uncertain due to a confluence of the US Fed's rate hikes, China's faltering recovery and OPEC+'s persistence with supply cuts. Consensus forecasts suggest oil at an average of $79 per barrel for 2023. Under such a scenario, Woodside's earnings could decline by 41.4% from 2022.

Woodside Energy's earnings could fall in 2023 as lower energy prices outweigh volume gain. With the easing of supply tightness globally, the price for Asia's LNG in 2023 averaged at $14.39 per MMbtu, a significant 58% decrease from the previous year. Nevertheless, the company experienced a 19% increase in sales volume, amounting to 201.5 million barrels of oil equivalent. Based on initial reports, Woodside's revenue for 2023 is projected to fall by 17%, down to $14.03 billion compared to the previous year.

Majority of the energy sector will struggle due to low prices, with LNG demand being impacted by weak global industrial production, Mathan Somasundaram, CEO of Deep Data Analytics said, adding that Woodside and Santos were classic examples.

Additionally, on February 7, Woodside halted its acquisition discussions with Santos, as the parties could not reach a mutual agreement on the valuation.

• "With revenues pre-announced for oil and gas companies, costs remain the big unknown and could see downside risk to future earnings," Jarden analysts wrote.

• "If the growth outlook presented looks murky or uncertain, shares in the company can be sold off accordingly," said Tim Waterer, chief market analyst, KCM Trade.