Could Woodside Petroleum Limited
(ASX: WPL) shares be a turnaround dividend idea?
Woodside is the biggest Australian gas and oil producer.
More LNG supply
Before answering the turnaround dividend question, Woodside announced today that it was expanding its long term LNG supply agreement.
Woodside and Uniper Global Commodities have agreed to increase the supply from Woodside’s global portfolio to Uniper. The quantity of LNG to be supplied under the amended sale and purchase agreement (SPA) has doubled. The initial supply commencing in 2021 is now for a volume of up to 1 million tonnes per annum (mtpa), increasing to approximately 2 mtpa from 2026.
The majority of LNG supply from 2025 is conditional upon a final investment decision on the development of the Scarborough gas resource offshore Western Australia. The 13-year term of the SPA is unchanged.
Woodside have also agreed to collaborate on potential carbon neutral LNG, including enhanced carbon accounting, and future hydrogen opportunities.
The resources company said that the agreement with Uniper highlights the strong market demand it’s seeing for Scarborough LNG as customers consider their energy requirements from the second half of this decade. Woodside has secured long term customers for over 40% of expected Scarborough equity production.
Is Woodside a turnaround ASX dividend share idea?
The oil price has been on a bit of a rollercoaster since the start of 2020. COVID-19 saw a huge drop of the oil demand and the oil price. But since then, it has been rising steadily. It got a boost recently when Saudi Arabia decided to reduce its supply.
If the oil price can rebound to where it was at the start of 2019 then Woodside could be a shorter term ASX dividend share idea. But I don’t know about the longer term because the demand for oil is not likely to be as high as it was before. However, other things like gas and hydrogen could be a good substitute.
For me, I’d only want to invest in ASX dividend shares that can be reliable through all parts of the cycle. That could be dividends from businesses like Brickworks Limited (ASX: BKW). A dividend share with a lot of growth potential is Magellan Financial Group Ltd (ASX: MFG).
