3 key factors that helped propel the Woodside share price 60% higher in 2022

The Woodside Energy Group Ltd (ASX: WDS) share price was one of the strongest performers within the S&P/ASX 200 Index (ASX: XJO) in 2022, rising by around 60%.

It was an eventful year for the ASX energy share, with things largely going the company’s way. Let’s compare that large rise to the ASX 200 itself – the index dropped by around 7%, so there was a huge outperformance by the company.

Higher energy prices

After the massive disruption to oil prices at the start of COVID, the oil price steadily recovered. It was a steady climb during 2021 and then the Russian invasion of Ukraine put a rocket under energy prices as the world looked for other sources of supply away from Russia.

In the second quarter of 2022, it achieved an average realised price of $95 per barrel of oil equivalent. When revenue for the same amount of production increases, it largely adds to net profit.

Then, in the third quarter of 2022, the business reported that the average portfolio realised price rose by 7% to $102 per barrel of oil equivalent.

Investors typically like to evaluate the Woodside share price by thinking about its profitability, so it wasn’t a surprise that investors were excited by the business.

Merger

Investors may also have focused on the fact that Woodside was able to merge with BHP Group Ltd’s (ASX: BHP) petroleum business. This transformed Woodside into a “top 10 global independent energy producer by hydrocarbon production.”

Woodside explained that the merger will strengthen cash generation, improve its growth profile and unlock at least $400 million of annual pre-tax synergies.

By becoming a bigger business, Woodside will be able to help each shareholder because of scale advantages.

Bigger dividend

Woodside has revealed that its dividend policy will be based on its net profit after tax (NPAT), with a minimum dividend payout ratio of 50%.

The company also said that “additional opportunities to provide returns through special dividends and share buy-backs.”

Some investors may be attracted to the prospect of a larger dividend from the company and investing, pushing up the Woodside share price to get it.

Another big annual dividend is expected in 2023. According to Commsec, it could pay a dividend per share of $3.23. This would be a grossed-up dividend yield of 13.6%.

The post 3 key factors that helped propel the Woodside share price 60% higher in 2022 appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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