Woodside's Rally Has Been About Oil Prices, Not Production, Fund Managers Say

A geopolitically driven surge in oil and LNG prices has masked a weak first half, with Scarborough's completion now the catalyst to watch.

9 Sep 2026 · 5 min read

Woodside Energy is up more than 35 percent in 2026, and fund managers largely agree the rally has had very little to do with the company itself. Oil and LNG prices whipsawed through the year on the back of conflict and ceasefire headlines out of the Middle East, and Woodside's share price followed almost tick for tick. With its flagship Scarborough project now nearing completion and Exxon-linked takeover speculation swirling in the background, the debate among managers has shifted from the geopolitics to a harder question: how much of this year's gain is actually repeatable.

A geopolitical rollercoaster

Milford Asset Management described oil prices falling around 20 percent in June as confidence grew in a US-Iran peace deal, prompting the fund to trim its energy overweight but keep a core position on the view that depleted storage and expected shortages in July and August still justified holding on, even with valuations reflecting a long-term oil price of only around US$70 a barrel. Paradice Investment Management reduced its Woodside holding over the same period as the conflict approached resolution, while Australian Eagle Asset Management trimmed after the shares hit its target levels, with a planned turnaround at Pluto LNG Train 1 also set to restrict production ahead of the Scarborough start-up. The pattern then reversed sharply in July, when renewed disruption in the Strait of Hormuz drove crude prices up more than 20 percent, and Solaris Investment Management and Milford both reported Woodside as a major contributor to performance, with Solaris noting the company's second-quarter result also showed production and revenue running ahead of expectations.

Exxon speculation and a Browse asset nobody quite wanted

Pendal Group poured cold water on media reports that Exxon was in early talks about LNG-focused Asian mergers involving Woodside, arguing a formal approach looks unlikely given Exxon previously sold down its Scarborough interest and Woodside recently took over operatorship from Exxon in the Bass Strait. Pendal also flagged that Woodside had pre-empted a proposed Inpex acquisition of CNPC's stake in the Browse joint venture, lifting its own stake by nearly 11 percentage points to 41.27 percent in what it described as a likely unwanted increase in exposure to a high-cost, low-returning asset, undertaken mainly to keep Browse gas flowing to the North West Shelf rather than to an Inpex-controlled rival project. Quest Asset Partners offered a different read on the Exxon connection, noting Woodside's new Louisiana LNG plant has become attractive to US gas producers, including Exxon, who are themselves building out LNG trading capabilities, and used that thesis to add Woodside to its energy holdings, partly funded by trimming Santos.

Buy, hold, or prefer Santos instead

Among the bulls, Yarra Capital Management called Woodside its leading oil and gas holding, pointing to low operating costs across its global asset base and a production growth profile led by Scarborough and Louisiana that it expects will support double-digit free cash flow and, in turn, earnings and dividends within a couple of years. Maple-Brown Abbott also rated it a buy, arguing Woodside's limited exposure to the Middle East and an underappreciated gas trading business make its diversified portfolio more valuable in the current environment than the market has historically given it credit for.

ClearBridge Investments landed on a qualified buy, but made clear it prefers rival Santos, arguing Woodside's Louisiana LNG project is essentially a low-margin arbitrage between US gas prices and Middle Eastern buyers that will absorb heavy capital spending and add debt, compared with Santos's production growth and free cash flow generation. Alphinity Investment Management stayed at hold, agreeing Woodside's location value has increased as Asian buyers look to diversify away from Middle East supply, but remaining nervous about further earnings downgrades from the oil price correction and about the long-troubled Browse project. Pendal Group's own monthly commentary confirmed a structural preference for Santos over Woodside on free cash flow grounds, making its underweight Woodside position a performance detractor through the rally.

We think that'll really support earnings and dividends, and it's an attractive name for us.

— Yarra Capital Management, Article, June 2026

Scarborough nears the finish line as capital discipline tightens

Operationally, Pendal's August updates showed Scarborough reaching first gas at the LNG plant in July, with first LNG still targeted before year end, alongside a tightened but unchanged full-year production guidance range. Net debt and gearing both sat above Woodside's target range, and the company used the period to reset its capital priorities, dropping a previous $5 billion commitment toward reducing its emissions profile, ending preferential lower hurdle rates for New Energy projects, and putting its Beaumont Ammonia project up for sale at an expected loss, while targeting $350 million a year of operating and capital cost cuts by 2028.

TAMIM's reality check

Tamim Funds Management offered the most pointed assessment in September, arguing Woodside's 35.8 percent share price gain for the year had come almost entirely from a roughly 20 percent rise in realised oil and gas prices tied to Persian Gulf geopolitics rather than from operations, since output actually fell 13 percent over the first half. It noted gearing of 20.6 percent sits outside Woodside's own target range and that the interim dividend was not covered by first-half free cash flow, calling that a deliberate smoothing decision rather than evidence the payout is comfortably funded. Tamim viewed Scarborough's 98 percent completion as the real near-term catalyst for restoring volume growth, treated Louisiana LNG as a longer-dated and less certain bet given a wave of new global LNG supply expected by 2029, and pointed out that consensus analyst price targets sit barely above the current share price after the rally, implying little further upside is priced in. It also dismissed Exxon takeover speculation as a possible outcome rather than a reason to hold the stock.

Consensus analyst price targets sit barely above the current share price after the rally, implying little priced-in upside.

— Tamim Funds Management, Monthly Report, September 2026

With Scarborough's first cargo now the clearest near-term catalyst, fund managers say the next few months will show whether Woodside can convert a geopolitically driven rally into an operationally driven one. The cost-cutting target, the pace of gearing coming back inside its own range, and whether oil and LNG prices hold without further Middle East disruption are the factors most likely to decide whether this year's gain proves durable or, as Tamim suggests, largely borrowed from a risk premium that could fade.