Why Woodside (ASX:WPL) shares are ‘best placed’ to benefit from the energy crisis: expert


The Woodside Petroleum Limited (ASX: WPL) share price is up 6.8% in early trade today, currently at $33.54 per share.

Woodside shares have been thrust into the spotlight as the global energy crisis ratches up another level.

Energy prices for everything from crude oil, to gas, to coal (and more) began trending sharply higher in early December. That’s when the global reopening from the pandemic began to pick up pace only to find that energy demand growth was outstripping new supply growth.

The next big shock to energy prices was, of course, Russia’s brazen invasion of neighbouring Ukraine. That’s sent the price of Brent crude oil rocketing above US$118 per barrel. In case you’re wondering, on 1 December that same barrel was trading for US$69.

With that in mind, we turn to Hamish Tadgell, portfolio manager of SG Hiscock’s High Conviction Fund, and his take on why Woodside shares look best placed to benefit from these soaring prices.

The strategic value of its underlying assets

Addressing the Australian Financial Review, Tadgell compared the ASX energy sector to the yesteryear’s telecom sector:

In some respects, we see the energy sector like the telecommunications sector a few years ago when it was plagued with concerns by investors around competition and regulation before COVID-19 found a renewed appreciation for the strategic value of the underlying assets.

Narrowing it down to why Woodside shares appear best placed to benefit, Tadgell said:

We see Woodside Petroleum as the best placed domestic beneficiary of any tightness in regional energy. Woodside’s exposure to spot cargoes of LNG is around 20 per cent, but its valuation starting point is cheaper owing to the complex merger of equals with BHP Group Ltd (ASX: BHP) expected to be finalised mid-year.

The deal – if approved – will position Woodside with twice the levels of production and a balance sheet with low levels of gearing and sufficient flexibility to fund various growth options, including Scarborough in Western Australia.

How have Woodside shares been tracking?

Woodside shares have charged higher in the new year, up a stellar 48.7%. And that’s despite going ex-dividend on 24 February.

By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 6.6% year-to-date.

At the current price, Woodside shares pay a trailing dividend yield of 5.6%.

Source: Read More

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