Bought Woodside Energy

Bought half my position (2.5%) in Woodside Energy yesterday.  Long term dividend play.

Why?

• I can't see how Europe manages to replace their gas from Gazprom.  Only the US can grow supply now, but they are constrained by pipeline and export capacity.  We need to wait till 2025-2028 to see substantial increase: "global capacity looks set to soar from around 450 mtpa today to 550 mtpa by 2028".  But even that extra 100 mtpa only equals ~13 bcf/day, less that the ~18 bcf Europe imports from Russia.

• After Woodside completed the merger on June 1st, their shares jumped on massive volume.  I don't know why, I was expecting the grind down to continue  Maybe index funds were buying the enlarged energy company.

• From 2021 earnings they paid a 5% dividend (after WHT).  Thats 80% of NPAT, with an LNG ASP of USD 58.1/boe (slide 6) - roughly USD 10.5/btu.  2022 prices are a lot higher than 2021's.  The chart below shows US prices - European and Asian prices follow the same pattern (at a much higher price level).

Why did I only buy half?

We are in a bear market. Right now we're in a bear market rally.  But it will stop, and we'll later move back to where the VIX is in the 30's and the market drops weeks or months at a time.  By then, Fundamental Analysis, Valuations, or Technical Analysis won't matter: stocks will just drop like rocks.  Most likely, energy stocks eventually get pulled into the vortex.

The fundamental risks to this play are recession, Putin dying, or China invading Taiwan.