WDS, Woodside Energy Group Limited

Will it survive?

• Can it pay its interest? 13.0×
  Comfortable
  Operating income $3.9B ÷ interest expense $299M
  What this means

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.

• How heavy is the debt, net of cash? $6.0B · 1.5× operating profit
  Modest net debt
  Cash $5.7B + ST investments $229M − debt $12.0B
  What this means

  Netting $5.9B of cash and short-term investments against $12.0B of debt leaves $6.0B owed, about 1.5× a year's operating profit (3.1× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 0d
  Negative, funded by others
  DSO 49 + DIO 30 − DPO 80 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money.

Is it a good business?

• Return on invested capital 9%
  Solid through the cycle
  5-yr median, range 6%–18%; 7% latest = NOPAT $3.0B ÷ invested capital $42.2B
  Industry peers: median 7%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 5 years (it ran 7% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 16%
  High through the cycle
  4-yr median margin, range 7%–34%; latest $2.1B = operating cash $7.2B − maintenance capex $5.1B
  Industry peers: median 20%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 16% of revenue this year, a 16% median across 4 years. It chose to put $2.9B more into growth, so free cash flow this year was ($782M) — the gap is investment, not weakness.

• Are earnings backed by cash? 2.65×
  Cash-backed
  Cash from ops $7.2B ÷ net income $2.7B
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 97%
  Returns most of it
  Dividends + buybacks $2.1B ÷ Owner Earnings $2.1B
  What this means

  Of $2.1B Owner Earnings, $2.1B (97%) went back to shareholders, $2.0B dividends, $53M buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 1.57×
  Expanding
  Capex $8.0B ÷ depreciation $5.1B
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 3 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Pass
  Revenue ≥ $2B · $13.0B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.59×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $12.0B vs $3.2B WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Near
  A profit every year (6-yr record) · 1 loss year
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Pass
  Uninterrupted dividends · paid every year (6)
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Pass
  Earnings +33% over the record · +79%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $1.39/share (latest year $1.43), the averaged base the calculator's gate runs on, and book value is $18.89/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2020–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 5 of 6
  What this means

  Lost money in 1 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 1 of 5 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin −13% → 29% (3-yr avg ends)

  In the filing’s words The filing ties gains to its own pricing, but names price competition too — pricing power that is real yet contested, not unopposed. The margin shows who is winning.

  What this means

  Through the cycle the operating margin widened — about −13% early to 29% lately, median 30% — pricing power intact or improving.

• Reinvestment, incremental ROIC 14%
  What this means

  Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.

• Owner earnings growth −27%/yr
  What this means

  Owner earnings shrank about 27% a year over the record.

• Worst year 2020 · −143.6% op. margin
  What this means

  Operations went underwater in 2020, understand why before trusting the good years.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.