Could Woodside Energy be a takeover target?

Shares in Woodside Energy Group Ltd (ASX: WDS) are trading higher after a research report from Macquarie teased the idea of the oil and gas major being a takeover target.

US major rumoured to be on the hunt

The research report issued on Friday morning argued that the Strait of Hormuz crisis has de-rated Qatari liquefied natural gas (LNG) assets for now, and arguably permanently.

Macquarie said this could mean there is more pressure for mergers and acquisitions in the LNG space, “making Woodside a viable target”.

The broker is arguing that consolidation in the energy sector will continue, and notes that Exxon Mobil Corp (NYSE: XOM) missed out on buying assets in Guyana 12 months ago.

Quoting Bloomberg as a source, Macquarie writes that ExxonMobil is “screening LNG acquisitions including Woodside”.

They added:

With US shale consolidations done and opportunities maturing, international deals make sense again, particularly in the LNG segment (post Strait of Hormuz).

Woodside is an attractive candidate, they said, with its M&A strategy over the past five years building a company that aligned strategically with what ExxonMobil would be after.

Macquarie said ExxonMobil would have to bring an attractive offer to the table, adding, “In our view, a meaningful premium that would be much harder to deliver as a standalone entity could increase the likelihood of board engagement”.

Hurdles to the deal could be board reluctance and the company’s large retail shareholder base, Macquarie said.

Woodside Energy shares looking like a good buy

The broker has raised its price target on Woodside shares by 9% to $32.80 per share, and if a 20% weighting for M&A activity was included, this would rise to $38.50.

Woodside shares are currently changing hands for $30.29, up 2.7% on the day. The company is valued at $56.06 billion.

RBC Capital Markets is also a fan of the stock, saying in a research note earlier this week that Woodside was its top large-cap pick in the energy sector, “based on its strong longer-term growth profile, and potential to generate more near-term higher priced gas hub sales and LNG trading volumes due to the Middle East conflict”.

They added:

Woodside’s 2Q sales revenue is expected to be supported by higher crude and … commodity pricing, despite production volumes being affected by the Pluto LNG project scheduled turnaround. We expect the volatile pricing environment to create opportunity for relatively high gas hub sales and LNG trading volumes quarter on quarter. Woodside’s production growth outlook remains highly attractive, with Scarborough (Pluto LNG T-2) on stream by the end of 2026, followed by Trion oil in 2028 and Louisiana LNG in 2029.

RBC has a price target of $34.50 on Woodside shares.

The post Could Woodside Energy be a takeover target? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Which ASX oil companies does RBC Capital Markets like amidst more Middle East conflict?
• 5 things to watch on the ASX 200 on Thursday
• How much do I need in superannuation to receive $6000 per month in passive income?
• With Hormuz closed, is there an opening to buy Woodside shares?

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