There were announcements this morning (30/8/2022) from BHP Group (BHP) and Woodside Energy (WDS). Many BHP shareholders will also hold Woodside following the merger of the BHP oil/gas operations into Woodside. I continue to hold both having decided that now was not the time to exit a major gas producer. Institutional investors who wanted out of the sector due to their focus on ESG will surely have been regretting it.
Woodside announced half-year results and their Underlying Net Profit After Tax was up 414% on the prior half year. Obviously there was a positive impact from the merger but the major impact was from higher realised prices for their products which more than doubled to $96.4 per barrel of oil equivalent. If your home heating bills are going up, you can see why! Worldwide gas prices have risen mainly due to the reduction in supplies from Russia after the invasion of Ukraine.
Some 70% of Woodside’s portfolio is in gas production and they continue to invest in new gas developments. But they are also now investing in hydrogen production and carbon capture and storage. You can see a presentation from their CEO on the results here: https://webcast.openbriefing.com/8864/player/?player_id=48929
The announcement from BHP was about three requisitioned resolutions that will be put to the Annual General Meeting. All three are advisory resolutions related to ESG aspects. Resolution 1 simply allows shareholders to express an opinion which is probably harmless.
Resolutions 2 and 3 are more problematic. Resolution 2 requests that the company proactively advocate for Australian policy settings that are consistent with the Paris Agreement objective of limiting global warming to 1.5 degrees C. Resolution 3 ensures reporting against the objective of Resolution 2.
I shall be voting against the latter 2 resolutions because there may be no direct connection between the company’s operations and the Paris Agreement to limit carbon emissions. Australia can limit carbon emissions by law if it considers it necessary to do so and in any case a substantial proportion of Woodside’s operations are outside Australia.
Resolution 2 attempts to impose an obligation on the company to interfere in what are political matters in Australia and hence I consider it as unreasonable. It is also unreasonable because more gas production might offset the use of coal for power generation and hence be beneficial in reducing carbon emissions. In reality these resolutions might be impossible to implement in any sensible way.
In summary these resolutions seem to be more about posturing on environmental commitments than practical objectives that the company could implement. They are attempting to force the management to make decisions on what may be best for the business.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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