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Is It Time To Buy Woodside Petroleum?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Woodside Petroleum Ltd (ASX: WPL) is a global energy supplier that is specialised in the downstream petroleum sector. Woodside supplies oil and gas and is the largest natural gas producer in Australia. Woodside’s market capitalisation is A$18 billion.



What has happened to Woodside Petroleum share price?

Over the past month, Woodside Petroleum share price has fallen 30% and is currently trading at A$19.85.


Why did Woodside Petroleum share price fall?

The fall in Woodside Petroleum share price can be attributed to the falling global oil price and the weakening in economic activity due to COVID-19. The recent drop in oil prices is caused by supply and demand issues. On 5-6 March 2020, OPEC and non-OPEC oil producers met in Vienna to discuss oil production and prices in the wake of weakening global demand due to lower global economic activity in part due to the impact of the coronavirus (COVID-19). The meeting concluded with Saudi Arabia and Russia not agreeing to cut production to increase the price of oil. This has resulted in Saudi Arabia and Russia embarking on a production war to capture increased share of the global oil market regardless of the implications for the price of oil. On the demand side, COVID-19 is causing a fall in global oil demand, putting further downward pressure on global oil prices. With production exceeding demand, global oil prices (WTI crude) have dropped to around US$21 (today 2 April 2020) per barrel from US$55 – US$60 per barrel.


How will this effect Woodside Petroleum?

Over the short-term, the outlook for Woodside Petroleum is negative. This short-term outlook is based on the challenging operating environment Woodside Petroleum is facing due to COVID-19 and a weakening oil price. However, it is important to note that these effects are only short-term and should not underpin the long-term growth outlook for Woodside Petroleum. In this respect, Woodside Petroleum has maintained its 2020 production guidance at 97 – 103 MMboe. Woodside has also announced a 50% reduction in planned capital expenditure for 2020 to improve free cash flow.


What is the long-term outlook for Woodside Petroleum?

The long-term outlook for Woodside Petroleum is positive. This outlook is based on several long-term projects that should underpin future growth of the company. Firstly, the developments of the SNE field located on the west coast of Senegal, Africa. This project is estimated to begin production in 2022, with 100,000 barrels per day production capacity. Secondly, development of the Scarborough gas field located offshore Western Australia. This project is estimated to and provide an additional 4 – 5 million tons per annum (MTPA) gas delivered to Pluto LNG. The final investment decision for this project has been delayed to 2021. Finally, the Browse Basin gas field located offshore Western Australia. This field is Australia’s largest untapped conventional gas resource. It is estimated that there is 13.9 trillion cubic feet (TCF) of dry gas located in this field. The project should deliver 10 million tons of gas to the existing North West Shelf infrastructure per year.

Long-term investors that want exposure to the petroleum downstream industry could consider Woodside Petroleum as a potential investment, as the share price has fallen significantly since February 2020.



This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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