Woodside bullish on gas demand despite weaker cash flow outlook

Woodside chief executive Meg O’Neill said the company will keep investing in oil and gas, batting down concerns about weaker long-term demand for the fossil fuel amid a global push towards decarbonisation.

O’Neill endured stern questioning at the company’s annual investor day on Wednesday, especially over Woodside’s free cash flow outlook, which has slipped as oil prices retreat from their war-fuelled highs.

The Perth-based company flagged a $US7 billion ($11 billion) drop in predicted free cash flow over the next four years, with Woodside’s chief financial officer Graham Tiver attributing the slide to a change to the company’s oil price outlook, from about $US85 a barrel to $US70 a barrel.

O’Neill said Woodside’s greater scale and global reach from buying BHP’s petroleum business and its disciplined approach to new investment would allow it to improve its performance.

Woodside also presented a bullish view of gas demand based on a scenario where global heating caused by fossil fuels to edge up about 2.0 degrees. It also forecast a higher demand for gas even if temperature pushed over 2.5 degrees.

“Supply from gas and oil projects that are operational today and under development will not meet future demand and additional investment in gas and oil is required,” O’Neill said.

Both outlooks were based on work released by industry consultant Wood Mackenzie in September that also included a less damaging 1.5-degree scenario it described as “still possible but … much depends on actions taken this decade.” Woodside on Wednesday did not address the outlook for gas demand in that circumstance.

However, O’Neill added that as Australia’s largest oil and gas company Woodside was in a position to withstand the transition in the energy markets, from fossil fuels to renewables.

“It is founded on Woodside’s long track record of growing value and returning value to shareholders through the cycle,” she said.