Why Woodside believes its dividend bonanza can continue

Note: This interview was recorded on Wednesday 28 August 2024.

Woodside Energy Group's (ASX: WDS) share price lifted more than 4% during trade on Tuesday, after the company delivered stronger-than-expected H1 2024 earnings and a 6% cut to unit production costs. 

Despite a decline in production and revenues, Woodside announced a dividend of US$0.69c/share (fully franked), at a payout ratio of 80% of underlying net profits. For context, the market expected a US$0.51c/share dividend. This no doubt influenced the company's share price rise on results day - and boosted confidence in management's ability to maintain financial stability despite various operational challenges. 

Given Woodside has recently announced two acquisitions in the US that were not well received by the market, investors may be worried that the oil and gas giant can maintain these lofty dividends in the face of increased capital expenditure over the next few years. 

But Woodside Chief Executive and Managing Director Meg O'Neill told Livewire that the firm has several levers it can pull to continue delivering income to investors. 

"We are in a period of high investment as we speak. We've been doing a bit of hedging to ensure that we have sufficient cash flow if oil prices were to drop, for example, to pay our bills and to continue our capital investment program. So, hedging is one lever," she says. 

"There's always cost management choices that we can make, scaling back on some of the discretionary activities. Those are the sorts of things that we would look to do before trying to reduce the dividend payout ratio." 

O'Neill also believes these projects have been misunderstood by the market, and argues they will help Woodside remain competitive (and relevant) in a low-carbon future. 

In this C-Suite Reporting Season interview, O'Neill breaks down the company's latest result, outlines the dividend outlook, and provides an update on the progress of some of its major projects. 

She also shares how the company is tracking on its climate targets and outlines where the firm is investing for future growth. 

Timecodes 

• 0:00 - Intro 
• 0:24 - Key figures investors need to be aware of 
• 1:03 - Why a high payout ratio can be maintained for dividends in the future 
• 2:11 - Levers Woodside can pull to keep payouts high
• 2:48 - Macroeconomic impacts on oil and gas prices 
• 3:44 - Updates on Sangomar, Scarborough and Pluto Train 2 projects 
• 4:47 - How Woodside cut costs 6%
• 5:28 - What the market is getting wrong on Woodside's two new acquisitions (Tellurian (NYSE: TELL) and OCI Global's (AMS: OCI) Clean Ammonia project) 
• 6:36 - Outlook for these projects 
• 7:18 - How Woodside is tracking on its climate targets