Woodside Energy Group Ltd (ASX:WDS) enters Thursday's ASX trading session with a tailwind from higher crude oil prices, but its latest production and hedging data indicate the company may not capture the full benefit of the rally in the near term. The first-quarter figures reveal that unhedged crude and condensate represent only about a quarter of total output.
The ASX cash market was in pre-open at the time of writing. Woodside shares closed Wednesday at A$29.93, down 0.9% following a 3.0% jump on Tuesday. Santos Ltd (ASX:STO) rose 1.3% on Tuesday but edged down 0.3% on Wednesday. Brent crude settled at $84.95 a barrel on Tuesday, up another 2% after Monday's 9.6% surge amid heightened U.S.-Iran tensions around the Strait of Hormuz.
The raw market reaction shows Woodside shares rose about 31% as much as Brent, while Santos gained about 14% of Brent's move. These figures are not direct measures of commodity leverage, as trading hours and company risk profiles also play a role.
Production Mix and Hedging Filter
Woodside's first-quarter production totaled 45.187 million barrels of oil equivalent (MMboe). Crude and condensate made up 18.473 MMboe, or 40.9% of output. All liquids averaged 221,000 barrels per day from total daily production of 502,000 boe, about 44% of the mix. Most of the company's volumes are not directly tied to Brent prices.
Applying the last published hedge book further limits exposure. Woodside's March 31 update showed 30 MMboe of 2026 oil output hedged at an average price of $74.23 per barrel. This implies roughly 60% of crude and condensate is hedged, leaving only about 24.5% of total group production exposed to spot oil prices. Brent closed Wednesday $10.72 higher than the average hedge price, a 14.4% premium, but the hedge book's impact on earnings is not straightforward. Woodside reported a $9 million pre-tax profit from oil hedges in the first quarter, even with Dated Brent averaging $81 a barrel.
LNG Price Gains Will Lag
Natural gas offers another revenue path, but progress is slower. In the first quarter, about 51% of LNG sales were tied to gas-hub indices, while contract lags kept LNG prices roughly flat versus the prior quarter. CEO Liz Westcott noted in the April report that further benefits from higher spot prices will be realized in subsequent quarters due to lagged contract pricing.
This delay means the clearest picture of Woodside's performance will emerge after its second-quarter report on July 29, covering the period before the July oil shock. Investors will focus on management's comments about third-quarter selling prices, any hedge book changes, and whether full-year production guidance of 172 MMboe to 186 MMboe is maintained.
Woodside carries about $9.3 billion in net debt (including leases) and has $8.3 billion in liquidity as of March 31. Capital spending guidance is set at $4.0 billion to $4.5 billion for 2026. The Scarborough project is 96% complete, targeting first LNG in the fourth quarter, while Louisiana LNG is 24% complete with first cargo expected in 2029. While higher prices help cover costs, project execution remains the key driver for equity value.
The oil risk premium could dissipate quickly if shipments from the Gulf resume or tensions ease. In that scenario, Woodside's hedges would cushion some of the downside. Phil Flynn, senior analyst at Price Futures Group, noted that traders seem to think they've "seen this movie before." U.S. crude stocks fell by 1.7 million barrels last week, less than the 2.6 million-barrel draw expected, while distillate inventories jumped by 4.6 million barrels, well above the 100,000-barrel build forecast.
The subdued share price movement aligns with Woodside's asset base rather than signaling that the oil rally is irrelevant. The company benefits from higher energy prices but sees LNG gains come through later and only has partial oil price coverage. This is not a pure play on Brent.
