Under the Spotlight: Woodside Energy ($WDS)

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Woodside Energy ($WDS) shares have jumped this week as conflict in the Middle East threatens one of the world's most important energy corridors.

The stock is up about 11% since the market closed last Friday, helped by a spike in oil and LNG prices after taWnker traffic through the Strait of Hormuz was disrupted.

The rally comes just days after Woodside reported record production for 2025, pumping 198.8M barrels of oil equivalent across its global operations.

The numbers were strong even though profits slipped. Lower oil and gas prices dragged net profit down 24% to US$2.7B, despite rising output and improved operating cash flow.

For investors, the short-term picture suddenly looks brighter. The longer-term story is less straightforward.

Energy crisis

Energy markets tend to react quickly to geopolitical shocks. This one is no exception.

The Strait of Hormuz, a narrow shipping lane between Iran and Oman, handles roughly 20% of global LNG flows and a large share of the world's oil shipments. Disruptions there can quickly ripple through global energy prices.

Reports of tanker traffic freezing in the region have already pushed Brent crude back toward US$80 per barrel (bbl), with some analysts predicting barrels could climb to $100bbl.

Woodside deals in both oil and gas energy markets. Around 46% of Woodside's revenue comes from LNG, while oil and condensate make up another 40%. 

The firm also benefits from something many energy companies lack: geographic diversification. Its production now spans Australia, Senegal, the United States and the Gulf of Mexico, reducing reliance on any single region.

That matters in a market where many energy producers remain concentrated in one region. QatarEnergy, the world’s largest LNG exporter, is heavily tied to the Gulf. U.S. exporters such as Cheniere ($LNG) and Venture Global ($VG) are clustered along the Gulf of Mexico. Even Australian rival Santos ($STO) still relies heavily on its Queensland LNG operations.

By comparison, Woodside’s portfolio spans multiple basins and export routes, which can soften the impact of regional disruptions.

Gas glut

Woodside’s challenge is not producing energy. It’s predicting how much the world will want later this decade.

Right now, the company is delivering on the supply side. Production hit a record 198.8M barrels of oil equivalent in 2025, while operating cash flow climbed 23% to US$7.2B. Output is rising even as oil and LNG prices have softened.

But the global LNG market could soon face the opposite problem it had after Russia invaded Ukraine in 2022. Back then, the world was scrambling for supply. Soon it may be swimming in it.

According to the International Energy Agency, global LNG markets are heading for a major supply wave. Around 300 billion cubic metres of additional LNG supply could enter the market by 2030 as new export projects come online.

For context, that’s around twice the amount of LNG that Australia currently exports each year.

Much of that growth is coming from the United States and Qatar, where a wave of new liquefaction plants is under construction. Woodside’s Louisiana LNG project is part of that same expansion, positioning the company inside what is quickly becoming the world’s fastest-growing LNG export region.

Meanwhile, global gas demand is forecast to rise about 1.5% a year through 2030, with most growth coming from Asia and the Middle East. If supply expands faster than demand, LNG prices could come under pressure later this decade. That would be a headwind for producers just as many of them are bringing large new projects online.

The counterargument is that LNG buyers increasingly value security over price. After Russia’s invasion of Ukraine exposed the risks of relying on a single supplier, many countries rushed to lock in long-term LNG contracts. That demand for energy security has helped underpin large new projects, even as the long-term outlook for fossil fuels becomes more uncertain.

Growth story

Woodside is betting big that demand will still be there. Two major projects sit at the centre of that strategy.

Scarborough in Australia is now over 90% complete and targeting its first LNG cargo in late 2026. The gas field will help extend the life of the Pluto LNG facility in Western Australia.

The bigger strategic shift is happening in the United States. Woodside's Louisiana LNG project, a three-train export facility on the Gulf Coast, is over 20% complete and expected to ship its first cargo in 2029.

The project recently secured a partner when pipeline giant Williams took a 10% equity stake and committed about US$1.9B in capital.

For Woodside, it gives the company a second major LNG export hub outside Australia as well as access to one of the fastest-growing LNG export regions in the world

Europe wants alternatives to Russian gas. Asian buyers want diversified supply. And LNG shipped from the U.S. Gulf can reach both markets.

Analyst views

Analysts have mostly taken a cautious stance. Several brokers lifted their price targets this week after oil prices jumped, but most still sit below Woodside's current share price.

Morgans raised its target to $33.55 and says higher oil prices improve the company's earnings outlook. But the broker also suggests investors avoid chasing the rally.

UBS and Citi both maintain neutral ratings, with targets around $28. Their reasoning is simple. History suggests geopolitical oil shocks often fade faster than markets expect.

If tanker traffic resumes and oil prices retreat, the recent rally could unwind just as quickly. 

Buy or sell?

For investors, Woodside currently sits between two powerful forces. In the short term, geopolitical risk and higher oil prices are working in its favour. In the longer term, the picture becomes more complicated.

Woodside is building some of the world's largest new LNG projects just as the global energy transition raises questions about future fossil fuel demand.

Even the company's own modelling suggests that under aggressive climate scenarios, profitability could come under pressure later next decade.

For now though, energy markets are focused on the present. And right now, supply disruption tends to favour producers..

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.