Where next for Woodside after climate plan showdown?

Woodside Energy (ASX: WDS) shares have continued their slide — falling from a high of $37 in mid-October 2023 to circa $28 today.

In the latest twist for the ASX oil and gas producer, 58% of voters at its latest meeting voted against its climate transition plan in a non-binding vote. However, Chairman Richard Goyder survived a push to oust him — winning 83.4% of votes compared to a near unanimous 99.2% back in 2021.

Woodside Energy shares: climate concerns

With its plans criticised as both vague and unambitious, Goyder noted that ‘the vote reflects the challenges and complexities of the energy transition, and today's outcome is one we take very seriously.’

For perspective, just two years ago 49% of voters were against the plan.

The meeting, which lasted some four hours, can be seen as a litmus test for climate action in Australia. The campaign against the plan had the support not just of proxy advisor Glass Lewis, but also major pension funds, including KLP, Norway’s largest pension fund, and Britain’s biggest asset manager LGIM.

Head of impact at the Australasian Centre for Corporate Responsibility, Harriet Kater — which led the campaign — argued that ‘it would be belligerent for Woodside to front up to shareholders next year with the same old approach.’

For his part, Goyder noted he would ‘like to state very clearly that we are committed to conducting our business sustainably. This means responding to climate change.’ For context, Woodside retains a $20 billion portfolio of new projects and is targeting net zero by 2050 for Scope 1 and 2 emissions — those produced directly or indirectly by its operations.

But AustralianSuper, after spending ‘a lot of time reviewing and engaging’ with Woodside, also voted against the plans — though did not vote to oust Goyder. A central theme among detractors appears to be that the plan is too reliant on contentious offsets, and is not aligned with the historic Paris climate agreement.

Woodside still expects to significantly expand fossil fuel production over the next few years, including opening new fields like Scarborough. Greenwashing inquiry chair, Senator Sarah Hanson-Young, considers that ‘the climate credentials of Woodside are up in smoke in the eyes of shareholders.’

Where next for Woodside shares?

In full-year results, Woodside achieved record production of 187.2 MMboe and excellent operated LNG reliability of 98%. Accordingly, the operator saw net profit after tax hit $1,660 million, while operating cash flow was $6,145 million.

CEO Meg O’Neill enthused that ‘Woodside is supplying energy the world needs from a high-quality portfolio which is geographically advantaged to meet growing demand for LNG…our tax contribution in Australia was a record A$5 billion in 2023…climate is integral to our company strategy, and we are on track to meet our net equity Scope 1 and 2 emissions reduction targets. Across our business in 2023 Woodside achieved a reduction in net equity Scope 1 and 2 emissions of 12.5% below the starting base, against our target of 15% by 2025.’

Scarborough remains a core concern — the project received four key environmental approvals in December 2023 and the project was 55% complete at the end of 2023. Since then, the business has completed the initial drydock of the hull for the Scarborough floating production unit and the first modules for Pluto Train 2 have arrived and been installed.

Perhaps the focus on Woodside’s oil and gas assets is unfair when there are still 18 coal generators in Australia. Gas is considered a transition fuel, and more gas — not less — may be needed for the energy transition.

Concerningly, official forecasts are already predicting that there will be an increased risk of winter gas shortages from 2025 as southern Australian production starts to decrease. And while pressure is on Woodside to reduce its expansion, this would presumably only lead to other operators taking on its projects or increasing their own production.

Perhaps the most intriguing question is one of investor priorities. Shareholders taking steps to stop new projects from going ahead, and to impose additional environmental requirements over and above legal mandates, could serve to both reduce profits and tax paid.

The only certainty is that this ESG story is not over.

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