Monsters of Rock: Woodside profit explodes as world implodes, and Sandfire dumps dividend

Woodside Energy triples dividend and profit goes wild as energy shortage bites
Sandfire dumps dividend as it approves expansion of Motheo copper-silver mine

The world is a far less friendly place than it was a few months ago, something which has for better or worse loaded up the coffers of coal, oil and gas players like Woodside Energy (ASX:WDS).

Its first full half year results since the absorption of BHP’s petroleum business to create one of the world’s largest energy producers has demonstrated just how much the war in Ukraine and short supplies in global energy markets have boosted the profits of companies on the nose only a couple years ago.

Woodside’s underlying NPAT and formal NPAT soared to US$1.64 billion and US$1.82b respectively on free cash flow of US$2.57b; an increase in profit of more than 400%.

Manna from heaven for shareholders, who will see their half year dividend rise 263% from US30cps last year to US109cps, with total distributions rising from just US$115m in H1 2021 to US$1.018b for H1 2022.

While higher costs of production weighed slightly on Woodside, higher prices and increased volumes from the integration of BHP’s business accounted for a whopping US$2.5b and US$820m of the increase in profit.

Prices paid for Woodside’s oil and gas exports more than doubled year on year to US$96.4 per barrel of oil equivalent as Russia’s invasion of Ukraine sent prices soaring.

More investments likely

While green groups, and Woodside’s own investors, continue to pressure the company to improve its climate commitments and environmental reporting, it is little wonder it wants to continue along the path of assessing new investments in the current price environment.

With its large Scarborough development off WA’s north west coast approved and the first phase of construction for Sangomar oil field in Senegal 63% complete, the next cab off the rank will be the first deepwater oil development in Mexico at Trion, an old BHP asset, along with the long-delayed Browse LNG field in WA.

The FID on Trion is expected in 2023, but will hinge on costs amid the current inflationary environment and supply chain blockages.

“The marketplace we’re in today is a very different one,” Woodside boss Meg O’Neill said on a call with analysts today.

Browse will be tougher to get across the line. Discovered in the 1970s, Australia’s largest undeveloped gas field has a high CO2 content, meaning it will live or die on the viability of carbon capture and storage, technology with a spotty history in WA.

Woodside received an offshore gas storage permit from Canberra last week for the Browse Basin, with Resources Minister Madeleine King describing CCS as a “a safe, key proven technology that can support the petroleum sector in its low carbon transition”.

Sandfire cuts divvy, says good times are coming

Less excited with their lot are Sandfire Resources (ASX:SFR) shareholders, who saw their dividend disappear into debt repayments and development for the MATSA and Motheo copper projects in Spain and Botswana.

Sandfire is selling a story on the exciting things to come down the line, as it approved an expansion of the Motheo copper and silver mine in Botswana, which will start out at 3.2Mtpa in June 2023 and expand over time to 5.2Mtpa delivering peak copper production of 55,000tpa.

SFR’s NPAT was little changed from last year, falling from US$128.6m to US$111.4m, with EBITDA rising from US$337m to US$447.3m and revenue up from $609m to a record US$922.7m after five months of contributions from the US$1.865bn MATSA mine.

The company produced 93,827t of copper, 28,618oz of gold, 32,328t zinc, 3312t lead and 952,000oz silver in FY22.

Sandfire says the Motheo expansion carries an IRR of 29% and will add another US$71.9m to the bill for the new African copper and silver mine, taking its total outlay to US$397.4m.