Woodside Energy Group (ASX: WDS) has faced significant...

Woodside Energy Group (ASX: WDS) has faced significant underperformance over the past year, with several key factors contributing to its struggles:

• Share Price Decline: Woodside’s total shareholder return (TSR) in 2024 was -21%, continuing a long-term trend of underperformance. Over a 15-year period, its TSR was just 0.7% per annum, significantly lagging behind the ASX100 and the global energy sector.

• Flawed Capital Allocation Strategy: Despite weak returns, Woodside has persisted with a hydrocarbon growth strategy, investing in marginal projects with a higher oil price assumption than many of its peers. This approach has raised concerns about its ability to generate sustainable shareholder value.

• Dividend Reduction: Woodside’s free cash flow dropped by 82% in 2024, leading to a 12% reduction in its final dividend. Since its merger with BHP Petroleum in 2022, the company has doubled its capital expenditure while halving its dividend, bucking the industry trend of prioritizing shareholder returns.

• Climate Strategy Rejection: A majority (58%) of shareholders voted against Woodside’s Climate Transition and Action Plan (CTAP) at its 2024 AGM, making it the only company in the world to receive a majority rejection of its climate plan. Despite this, Woodside has not made material changes to its strategy, raising governance concerns.
  We are in an ENERGY transition period. It is clear Renewables is the future and fossil fuels are in decline. All transition periods are a great challenge to management.

• Project Execution Issues: Woodside’s Sangomar project was 12 months late and 18% over budget, further eroding shareholder value. Additionally, its acquisition of Louisiana LNG in 2024 was seen as a high-cost investment, relying on operational improvements that the previous owner could not achieve.

Overall, Woodside’s strategic decisions, financial performance, and governance issues have contributed to its underperformance. Investors remain concerned about its ability to adapt to market conditions and shareholder expectations.