What’s Going on with Woodside’s Share Price?

What’s happened to Woodside’s share price?

Long-time considered an inclusion in a quality blue chip portfolio, Woodside Petroleum’s [ASX:WPL] share price has been on the skids for close to two years now. Since July 2014, and through to the start of April this year, Woodside’s share price dropped a whopping 43%.

The last time it traded at these levels was back in 2005. However, over the last month, shares in Woodside have jumped over 17%, as buyers re-enter the stock.

Why did Woodside do this?

As Australia’s largest energy producer, Woodside’s share price bore the brunt of the collapse in the oil price. Although Woodside is now primarily a gas producer, the price of oil and gas are directly linked.

However, with the price of oil jumping over 60% since the low in January, beaten-down energy stocks are clawing their way out of the abyss. In saying that, there is still a long way to go. While the bounce in the oil price has provided some short term relief, the industry looks to remain in structural oversupply as an increase in oil prices brings new supply back onto the market.

What now for Woodside?

There are two things that will continue to drive the Woodside share price from here — the oil price, and corporate activity. If the oil price can consolidate around these levels, it could put a floor under the price.

Stemming from its write-downs in February, Woodside looks for the moment, at least, to be treading cautiously. The company seems to have abandoned any large scale acquisitions for the time being — like its failed tilt at Oil Search [ASX:OSH] last year.

If the oil bounce continues, Woodside could potentially re-enter the M&A trail, though targeting smaller companies. With its strong balance sheet, Woodside will no doubt be on the lookout for quality assets. A dud deal, combined with a drop in the price of oil, though, could send the share price reeling.

Matt Hibbard,
Money Morning

Money Morning Australia