Woodside raises dividend, with inflated gas prices driving a surge in profit

Woodside Energy (ASX: WDS) saw revenue and profit rise while production fell this half, as the war in the Middle East inflated prices. The higher earnings supported an 8% increase in the interim dividend to 57 US cents per share.

However, gearing has pushed above the company's target range as Woodside spends heavily on three major projects at once. Only Scarborough is close to paying anything back, with Trion in Mexico, and the far larger Louisiana LNG terminal in the US, still years away.

"The Scarborough Energy Project is now 98% complete and remains on track to deliver first LNG cargo in the fourth quarter of 2026," said Woodside CEO Liz Westcott, who was appointed in March. Westcott also announced an annual cost savings target of US$350 million from 2028, to be delivered through a "structured review" of the business.

With production, revenue and first gas at Scarborough all disclosed in July's quarterly report, there was little left to surprise the market in today’s update; leaving the share price little moved, down 0.09% to $33.45 per share at midday.

Woodside HY26 results in focus

• Operating revenue up 13% to US$7,446m vs US$7,490m Macquarie ests (in line)
• Underlying EBITDA of US$4,647m vs US$4,617m ests (in line)
• Underlying NPAT up 7% to US$1,334m vs US$1,274m ests (5% beat)
• Reported NPAT of US$1,672m vs US$1,614m ests (4% beat)
• Average realised price up 20% to US$74/boe
• Production down 13% to 86.5 MMboe, in line with ests, reflecting the planned Pluto turnaround
• Free cash flow up 159% to US$352m, including US$1,725m of capital contributions from Stonepeak and Williams
• Capital expenditure down 36% to US$1,637m
• Fully franked interim dividend of 57 US cps vs 53 US cps ests (8% beat), an 80% payout of underlying NPAT
• Gearing of 20.6%, marginally outside the 10% to 20% target range on new lease liabilities, hedge settlements and receivables timing
• Liquidity of US$8,189m with drawn debt of US$11,450m

The Middle East conflict disrupted global LNG and oil supply through the half, lifting Woodside's average realised price 20% to US$74 a barrel of oil equivalent. That was enough to push revenue 13% higher even though the company produced 13% less than it did a year ago. Most of that shortfall was a planned turnaround at Pluto LNG, but with fewer barrels to spread fixed costs across, unit production costs rose to US$8.80/boe from US$6.80/boe.

Accounting rules allowed Woodside to book unused tax deductions from Pluto, which is why reported profit of US$1.67 billion came in higher than underlying profit of US$1.33 billion.

Free cash flow was US$352 million for the half, and only positive because Woodside's Louisiana LNG partners, Stonepeak and Williams, contributed US$1.7 billion towards construction. The interim dividend cost about three times that so Woodside covered the difference from its balance sheet. Gearing finished the half at 20.6%, outside its 10% to 20% target range.

Forward guidance

Woodside narrowed 2026 production guidance to 174 to 185 MMboe, from 172 to 186 MMboe, which implies a bigger second half than first, with Scarborough due to start contributing in the December quarter. Everything else was left unchanged, including capital expenditure of US$4.0 to US$4.5 billion and production costs of US$1.5 to US$1.8 billion.

Trion is 64% complete and targeting first oil in 2028, with three of 24 subsea wells drilled and installation due to start this quarter. Louisiana LNG is 28% complete and targeting a 2029 finish. Woodside said structural steel for the project is fabricated in the United Arab Emirates and that it is assessing alternative logistics routes and fabrication sources in response to disruption in the Middle East, to support the construction schedule beyond 2026.

Westcott's US$350 million annual savings target runs from 2028 and will be delivered through what Woodside called a structured review of the business. The company did not say where the savings would come from.

Bottom line

Higher prices carried a half in which Woodside produced less and spent heavily, but the December quarter is where that starts to change. Scarborough will add cargoes without adding much cost, easing the pressure on both cash flow and gearing as the second half plays out. Trion and Louisiana LNG remain years from contributing, so the build program will keep absorbing capital for some time yet. The difference is that the first of the three is now close enough to count on. 

HY26 results in focus comparisons are to Macquarie estimates published on 30-Jul, not consensus.