WDS: Future LNG Deals And Rate Cuts Will Support Cash Returns

Analysts have trimmed their price target on Woodside Energy Group by about $0.49 to approximately $27.42 per share, citing slightly softer long term revenue growth expectations, even as profit margin forecasts and long term valuation multiples remain broadly intact.

Analyst Commentary

Analysts covering Woodside Energy Group emphasize that the modest reduction in price target reflects fine tuning of long term assumptions rather than a fundamental shift in the investment thesis.

They note that the risk and return profile remains anchored by the company’s large scale LNG portfolio and balance sheet capacity, but that the timeline and magnitude of future cash flows are being reassessed in light of evolving macro conditions and capital allocation choices.

Bullish Takeaways

• Bullish analysts highlight that stable margin forecasts and largely unchanged valuation multiples signal confidence in Woodside’s ability to execute on existing projects and maintain disciplined cost control.
• They view Woodside’s exposure to long duration LNG contracts as a support for earnings visibility, which underpins the stock’s premium versus smaller, less diversified peers.
• Improving visibility on the global rate cutting cycle is described as supportive for energy demand and project financing conditions, which could enhance returns on Woodside’s medium term growth pipeline.
• Some bullish analysts argue that even with slightly softer growth assumptions, Woodside’s cash generation potential and dividend capacity provide an attractive total return profile at current levels.

Bearish Takeaways

• Bearish analysts are cautious that lower long term revenue growth expectations may constrain upside to the current valuation, especially if new project sanctions are delayed or resized.
• They flag execution risk around major LNG and upstream developments, noting that cost inflation or schedule slippage could erode the margin resilience currently embedded in forecasts.
• There is concern that a more uncertain macro backdrop, including shifts in long term energy demand and pricing, could pressure Woodside’s ability to sustain current valuation multiples.
• Some bearish analysts also cite potential policy and environmental headwinds, which could increase regulatory costs and capex requirements, weighing on future free cash flow growth.

What's in the News

• Saudi Aramco is expected to sign a U.S. LNG supply agreement with Woodside Energy during the Saudi crown prince's upcoming visit to Washington, positioning Aramco as a growing LNG player in the U.S. market (Reuters).
• Woodside Energy revised its 2025 production guidance higher to 192 to 197 MMboe, up from 188 to 195 MMboe previously, which signals confidence in near term output (company guidance).
• Third quarter 2025 production averaged 552 Mboe/d, down from 577 Mboe/d a year earlier, while year to date volumes rose to 549 Mboe/d from 520 Mboe/d, reflecting growth despite quarterly volatility (operating results).
• Woodside signed an LNG Heads of Agreement with Turkiye's BOTAS to supply around 5.8 billion cubic meters natural gas equivalent over up to nine years from 2030, mainly from its Louisiana LNG project, subject to a final sales and purchase agreement (company announcement).

Valuation Changes

• The fair value estimate has fallen slightly, down from A$27.90 to A$27.42 per share, reflecting modestly softer long term assumptions.
• The discount rate is unchanged at 6.67 percent, indicating no shift in the assessed risk profile or cost of capital.
• Revenue growth has improved modestly, with the long term growth rate revised from approximately minus 0.32 percent to minus 0.29 percent, implying a slightly less negative trajectory.
• The net profit margin has risen slightly, moving from 16.72 percent to 16.76 percent, suggesting a small uplift in expected profitability.
• The future P/E has edged down marginally, from 18.45 times to 18.34 times, pointing to a slightly lower multiple applied to forward earnings.