Tag: Woodside Energy

Oil+gas Companies, Woodside Energy Voting and Archie Norman’s Mission

Oil and gas companies share prices are rising today after the price of oil rose on news from Saudi Arabia. One such company I hold is Woodside Energy (WDS) and I now have the opportunity to vote at their Annual General Meeting which I have done on-line (difficult to attend the AGM in person as it’s being held in Perth, Australia).

There are a couple of resolutions to amend the constitution and one on “capital protection”. These have clearly been put forward by climate activists as a way to dictate to the management of the company what they should be doing. I voted against both resolutions as I believe managers should manage and not be directed by a small minority of shareholders, or shareholders in general. If shareholders do not like what the company directors are doing they can change them, or sell their shares of course.

I also voted against the two remuneration resolutions without a close examination. Typically too complex and too generous as with most large company schemes.

On the subject of voting at AGMs, Archie Norman, the Chairman of M&S, is leading a campaign for changes to Company Law to better enfranchise shareholders in nominee accounts and improve AGMs. He has written to the Business Secretary Kemi Badenoch asking for changes to improve shareholder democracy.

Hybrid meetings are allowed now but he apparently wants “all digital” ones to be permitted which I suggest is not a good idea. But otherwise he is right that this area of Company Law needs reforming. The Government is well aware of this after campaigns by ShareSoc et al, but action is progressing at a snail’s pace.

You can find more details of Archie Norman’s views and actions on the web.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Woodside Energy Results and Climate Report

Woodside Energy (WDS), an Australian gas and oil producer, issued their results this morning. I hold some shares in the company as a result of my holding in BHP when WDS acquired their oil interests.

The financial results were very positive helped by “realised prices” for their products increasing by 63%. They are continuing to expand production so as to meet demand.

Alongside their results they issued a 65 page “Climate Report” which explains what they are doing to control carbon emission. This is similar to other reports produced by major oil/gas companies and attempts to justify their actions in the face of those who would like to see all oil/gas production shut down.

This is what their CEO had to say: “As we have seen in the wake of the invasion of Ukraine, significant volumes of gas and other fossil fuels cannot simply be removed from our energy systems without consequence, let alone be switched off altogether overnight.

We need all options on the table if we are to successfully change the way we produce and consume energy and limit global temperature rise.

Energy security and the energy transition therefore should not be seen as alternatives. It is increasingly clear that they both require effective management and substantial investment.

In the Asia Pacific region, major economies such as Japan remain clear that they need Australia to continue as a secure, affordable supplier of energy, including liquefied natural gas (LNG). Investment in new LNG supply can help meet demand at affordable prices. And LNG can help Asia to decarbonise, for example by replacing coal, supporting renewables, and in hard-to-abate uses.

There have been reasons for optimism during 2022. The energy crisis has not deflected the world’s resolve to meet the goals of the Paris Agreement, which were reaffirmed at the Sharm elSheikh climate summit in November. Major economies introduced supportive new policies, such as the United States’ Inflation Reduction Act, and Australia legislated its climate targets.

But this is not uniform. The public discourse on the energy transition can be polarised and ideological, particularly in Australia. We believe this is to the detriment of careful analysis of climate science and delivery of practical solutions. We seek to rebalance this through this report and our broader advocacy”.

Comment: This seems eminently sensible and I will be happy to support the company’s position on this. I am likely to continue holding the shares while many institutions dump them in the face of ESG concerns.

On another subject, the FT has today reported that City of London Minister Andrew Griffith has attacked the impact of the Financial Conduct Authority’s consumer duty measures. He suggests that it could damage the sector and trigger a wave of spurious lawsuits.

I agree and said it was a complete waste of time and would add substantially to the costs of financial services firms which they would pass on to consumers. See my consultation response here: https://www.roliscon.com/Consumer-Duty-Consultation-Response.pdf

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Adjustments, Adjustments and Adjustments at Abcam, Oil+Gas Companies and FCA Decision on Woodford/Link.

Abcam (ABC) published their interim results yesterday (on 12/9/2022). I have commented negatively on this company and its Chairman before despite still holding the shares.

The same game continues – revenue up but reported operating profit down and cash flow from operations down. But adjusted operating profit up. What are the adjustments? These include:

£2.6 million relating to the Oracle Cloud ERP project (H1 2021: £2.0m); £6.0 million from acquisition, integration, and reorganisation charges (H1 2021: £3.5m); £9.0 million relating to the amortisation of acquired intangibles (H1 2021: £4.0m); and £13.0 million in charges for share-based payments (H1 2021: £6.7m).

The ERP project costs continue and I very much doubt that they are getting a justifiable return on the investment in that project now or in the future. Together with the acquisition, integration and reorganisation charges it just looks like a whole ragbag of costs are being capitalised when they should not be.

The company also announced there would be a webinar for investors on the day and a recording of it available on their web site later. Neither was available on their web site on the day or at the time of writing this. More simple incompetence!

The share price of Abcam has been rising of late which just tells you that most investors are unable to look through the headline figures and the sophistry of the directors.

As a change from investing in technology companies such as Abcam who of late are massaging their accounts, and not paying dividends, my focus has turned to commodity businesses. I have even been buying oil/gas companies such as Shell, BP, Woodside Energy and Serica Energy plus several alternative energy companies. There is clearly going to be a shortage of energy worldwide for some time while institutional investors have been reducing their holdings in some oil/gas companies simply from concerns about the negative environmental impacts and long-term prospects as Governments aim to reduce carbon emissions. But in reality the progress on carbon reduction is slow and I feel oil/gas companies will be making good profits for a least a few more years. Energy has to come from somewhere and these companies should do well and can adapt to the new environment easily. In the meantime, they will be paying high dividends and/or doing large share buy-backs.

I am generally not a big holder of commodity businesses as their profits can be volatile and unpredictable as they depend on commodity prices. These can be moved by Government actions or political disruptions such as the war in Ukraine. Will the war end soon? I have no idea. But even if it does there is likely to be a new “cold war” if Putin or other hard line Russian leaders remain in charge. I never try to predict geopolitical changes but just follow the trends in the stock market.  

The partially good news for Woodford investors is that the FCA has formed a provisional view that Link Fund Solutions may be liable for £306 million in redress payments to investors for misconduct rather than losses caused by fluctuations in the market value or price of investments. In other words, it may be nowhere near covering investors losses in the Woodford Equity Income Fund. They have announced this simply because Link is currently subject to a takeover bid which they have approved subject to a condition to commit to make funds available to meet any shortfall in the amount available to cover any redress payments. I suspect this is going to make gaining a full recover for investors somewhat problematic.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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BHP and Woodside Energy Announcements

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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