WOODSIDE ENERGY GROUP LTD annual report, Q4 FY2022

Woodside Energy Group Ltd. Form 20-F Summary

Reporting period: Fiscal year ended December 31, 2022. The filing is an annual report, not a standalone fourth-quarter report; the source text does not provide separate Q4 financial statements. Financial statements are prepared under IFRS in US dollars.

Business context

Woodside is an Australian global energy company engaged in oil and gas exploration, development, production, marketing and trading, with emerging hydrogen, ammonia, solar and carbon-management activities. The June 1, 2022 merger with BHP Petroleum materially expanded the company’s portfolio, geographic reach and production base. Woodside issued 914.8 million shares to BHP and obtained approximately $1.1 billion of net cash through the transaction.

Primary producing regions include Australia, the US Gulf of Mexico and Trinidad and Tobago, with development projects in Senegal, Australia and Mexico.
Production was weighted approximately 75% toward natural gas products and 25% toward oil and condensate.
Woodside had 1,898,749,771 ordinary shares outstanding at December 31, 2022.

Financial performance and key metrics

Metric	2022	2021	Change
Operating revenue	$16,817m	$6,962m	+142%
Gross profit	$10,277m	$3,117m	+230%
EBITDA excluding impairment	$11,234m	$4,135m	+172%
Reported NPAT attributable to shareholders	$6,498m	$1,983m	+228%
Underlying NPAT	$5,230m	$1,620m	+223%
Net cash from operating activities	$8,811m	$3,792m	+132%
Free cash flow	$6,546m	$851m	+669%
Investment expenditure	$4,441m	$2,727m	+63%
Production	157.7 MMboe	91.1 MMboe	+73%
Basic EPS	430.0 US cents	206.0 US cents	+109%

Margins: Gross margin was approximately 61.1%, EBITDA excluding impairment margin approximately 66.8%, and reported NPAT margin approximately 38.6%. These calculated ratios should be considered in light of the merger, which contributed only from June 1, 2022.

Revenue growth reflected the BHP Petroleum merger, higher LNG, oil and gas prices, the Pluto-Karratha Gas Plant Interconnector and strong operational performance. Average realised prices increased to $98.4 per boe from $60.7 per boe in 2021, including LNG at $116.9 per boe versus $58.8 per boe.

Cash flow, debt and liquidity

Cash and cash equivalents increased to $6,201 million from $3,025 million.
Interest-bearing debt was $5,138 million, down from $5,430 million; $283 million of maturing debt was repaid.
Lease liabilities were $1,634 million. Reported net debt, including lease liabilities, was $583 million.
Gearing was 1.6%, below the 10%–20% target range; gearing would have been 9.0% if the 2022 final dividend had been paid at year-end.
Liquidity was $10,239 million, comprising cash and available undrawn facilities. Undrawn debt facilities were $4,050 million.
Credit ratings of BBB+ from S&P and Baa1 from Moody’s were reaffirmed, and the company remained investment grade.
Dividends distributed during 2022 were $3,088 million. A fully franked final dividend of 144 US cents per share, or $2,734 million, was declared after year-end and paid on April 5, 2023. Full-year dividends totaled 253 US cents per share.

Material changes versus the prior comparable period

BHP Petroleum merger: Added substantial oil and gas assets, increased production and created $4,614 million of provisional goodwill. Acquired assets contributed $4,653 million of revenue and $2,042 million of profit before tax from June 1 through December 31, 2022.
Production expansion: Total production increased to 157.7 MMboe from 91.1 MMboe, including 61.4 MMboe from acquired assets after the merger date.
Capital base: Total assets increased to $59,321 million from $26,474 million, while oil and gas properties increased to $39,919 million from $18,649 million.
Share count: Shares outstanding nearly doubled because of the 914.8 million shares issued to BHP.
Operating infrastructure: The Pluto-KGP Interconnector began operations in March 2022 and enabled 9.4 MMboe of production through KGP.
Portfolio monetisation: Woodside completed the sale of a 49% interest in Pluto Train 2 to Global Infrastructure Partners and recognised a $427 million pre-tax gain, plus a $71 million revaluation gain in 2022.
Segment reporting: International operations became a separately reported segment following the merger, and prior-period segment information was restated for comparability.

Guidance, outlook and management commentary

2023 capital expenditure is expected to be $6.0 billion–$6.5 billion, primarily for Sangomar and Scarborough; this excludes potential asset sell-downs or changes in ownership interests.
Sangomar Phase 1 targets first oil in late 2023. At year-end, the project was reported as 77% complete, with seven of 23 wells completed.
Scarborough and Pluto Train 2 were approximately 25% complete at year-end and target first LNG cargo in 2026.
Mad Dog Phase 2 targets start-up in 2023, Shenzi North targets first oil in 2024, and Trion targets FID readiness in 2023.
Woodside targets more than $400 million of annual merger synergies on a pre-tax 100% basis, excluding transition and separation costs, and stated that implementation was ahead of target.
Woodside targets a 15% reduction in net equity Scope 1 and 2 emissions by 2025, 30% by 2030 and net zero by 2050 or sooner. Net equity Scope 1 and 2 emissions were 4,615 kt CO₂-e in 2022, 11% below the starting base, including retirement of 754 kt CO₂-e of carbon credits.
Woodside has a target to invest $5 billion in new energy products and lower-carbon services by 2030; more than $100 million had been spent by year-end. H2OK was targeted for FID readiness in 2023, but the filing states these investment targets are not guidance.

Unusual items, risks and contingencies

Underlying NPAT excludes merger transaction costs of $419 million, Orphan Basin exit costs of $142 million, a $954 million Pluto PRRT deferred tax asset recognition, a $245 million reversal of the Corpus Christi onerous contract provision and a $630 million after-tax Wheatstone impairment reversal.
Woodside recognised a $900 million pre-tax impairment reversal for Wheatstone based primarily on revised LNG price assumptions.
Hedging produced a pre-tax expense of approximately $475 million on 2022 oil price hedges. The company posted $506 million of collateral against hedge positions, reducing reported free cash flow; free cash flow would have been approximately $7,052 million excluding the collateral payment.
Restoration provisions were $6,253 million and total provisions were $7,179 million. Estimates are sensitive to removal timing, regulatory requirements, decommissioning scope, costs and discount rates.
Capital expenditure commitments were $7,762 million, predominantly related to Scarborough and Sangomar. The filing also disclosed $163 million of contingent liabilities and $199 million of contingent assets.
Key risks include commodity-price volatility, LNG demand and pricing, climate-transition policy, carbon-credit availability, project delays and cost escalation, environmental approvals, decommissioning liabilities, joint-venture dependence, cybersecurity, regulation and integration of BHP Petroleum.
Woodside disclosed legal proceedings involving challenges to Scarborough and Pluto Train 2 approvals. The filing states that, except for the disclosed matters, no legal or governmental proceedings were expected to have a significant effect on financial position or profitability.
The company expects approximately $600 million of additional depreciation expense in 2023 from changing certain upstream oil and conventional gas assets from proved-plus-probable to proved-reserve depreciation bases.
Internal control over financial reporting was affected by the need to operate and consolidate two separate ERP systems following the merger. Management stated that disclosure controls were effective, but the filing did not include management’s assessment or an auditor attestation of internal control over financial reporting because of the SEC transition period for newly public companies.

Most important facts for investors to verify

Whether Sangomar reaches first oil in late 2023 and remains within budget and schedule.
Whether Scarborough and Pluto Train 2 achieve first LNG cargo in 2026 and whether the sell-down process changes Woodside’s ownership or funding requirements.
Realisation of the stated annual merger synergies and the effect of integration costs, ERP controls and acquired-asset liabilities.
Sensitivity of cash flow, goodwill and asset valuations to oil and LNG prices, discount rates, production volumes and carbon costs.
The sustainability of the 2022 earnings and cash-flow levels after unusually strong commodity prices and the inclusion of only seven months of BHP Petroleum results.
The cash impact of the $6.0 billion–$6.5 billion 2023 capital program, dividends, debt maturities and decommissioning obligations.
Progress toward emissions targets, including the extent to which reductions rely on carbon credits rather than direct operational reductions.
Finalisation of provisional BHP Petroleum purchase accounting, including goodwill, restoration provisions, tax assets and other acquired liabilities.