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How can Australian investors get exposure to oil and gas? The biggest ASX-listed stocks in the industry are one way to get started.
Oil and natural gas prices have gone on a tear in 2022 as demand for energy hits pre-COVID-19 levels and the war between Russia and Ukraine sparks supply concerns.
Even though global governments are looking to transition to cleaner energy sources, oil and natural gas are expected to be an essential part of the world’s energy mix for years to come.
With compelling reasons to enter the oil and natural gas sector, what's the best way for Australian investors to get exposure? The biggest ASX-listed oil and gas stocks by market cap are one place to start.
Data for the list below was obtained on March 16, 2022, using TradingView’s stock screener. All market cap and share price data was accurate at that time.
1. Woodside Petroleum
Market cap: AU$30.01 billion
As the biggest ASX oil and gas stock by market cap, Woodside Petroleum (ASX:WPL) leads the country in natural gas production and is considered a pioneer in Australia’s liquefied natural gas (LNG) industry.
In 2021, the company’s natural gas production accounted for 5 percent of global LNG supply, and Woodside recorded full-year net profit after tax of US$1.98 billion for the year. Later in 2022, shareholders are set to vote on a merger with BHP's (ASX:BHP,NYSE:BHP,LSE:BHP) oil and gas business.
2. Santos
Market cap: AU$24.47 billion
Australian energy company Santos (ASX:STO) is the country’s second biggest oil and gas producer. The ASX-listed firm supplies its products to markets located across Australia and Asia.
Santos recently partnered with SK E&S and others to jointly develop carbon capture and storage (CCS) projects in Australia. “Already partners in the Barossa Gas Project and Darwin LNG, the agreement further strengthens the deep and expanding relationship between SK E&S and Santos,” said Santos Managing Director and CEO Kevin Gallagher in a press release. “We look forward to progressing this partnership to develop and commercialise CCS projects in our region on our path to a lower-emissions future.”
3. Beach Energy
Market cap: AU$3.47 billion
Oil and gas exploration and production company Beach Energy (ASX:BPT) has a diverse portfolio, with onshore and offshore oil and gas production in five basins across Australia and New Zealand.
Early in 2022, the company announced that the first two wells of its offshore Otway Basin campaign had been connected to the Otway gas plant and were delivering gas to market. According to Beach Energy, the new wells have doubled the plant’s production capacity to 180 terajoules per day.
4. Karoon Energy
Market cap: AU$1.21 billion
Global oil- and gas-centric company Karoon Energy (ASX:KAR) has assets in Australia, Brazil and Peru. The company is focused on continued growth through a broad pipeline of exploration and development projects.
After completing its first year as an oil producer, Karoon brought in AU$29.1 million in profit for the first half of its 2022 fiscal year. Its underlying net profit after tax rose from AU$12.9 million in the prior corresponding period.
5. Senex Energy
Market cap: AU$857.37 million
Last on this list of the biggest ASX oil and gas stocks is Senex Energy (ASX:SXY), which touts itself as a low-carbon Australian natural gas producer. The company’s Surat Basin assets in Southern Queensland contribute around 20 petajoules of natural gas per year to the market.
Senex’s results for the first half of its 2022 fiscal year include natural gas production of 10.2 petajoules and sales revenue of $74.1 million, an increase of 65 percent over the same period in the previous year.
Don't forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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The Company is pleased to announce that Western Gas (“WGC”) has provided an operational update on the drilling of the Sasanof-1 exploration well.
Highlights
- Valaris MS-1 rig has commenced mobilisation activities for departure to the Sasanof Prospect on the North West Shelf
- Secondary anchors securing the rig at Dampier outer harbour have been pulled, and the rig is secured to the GO Spica support vessel bridle for the tow to the Sasanof-1 exploration well location
- Primary anchors will then be recovered by the Far Senator, and the tow commenced. Transit time is expected to be approximately four days, weather dependent
- All required equipment has been loaded onto the rig for commencement of drilling
- Preliminary preparations for drilling operations are being conducted:
- Mud mat, low pressure wellhead housing and conductors prepared for deployment
- 13-3/8” casing stands made up and racked in preparation for deployment on completion of 17-1/2” hole section
- Third party services equipment being installed and tested
- Drilling operations (conductor jetting) are expected to commence during week starting Monday 23 May 2022
ABOUT SASANOF
The Sasanof Prospect covers an area of up to 400 km2 and is on trend and updip of Western Gas’ liquids rich, low C02 Mentorc Field.
ERCE estimates the Sasanof Prospect to contain a 2U Prospective Resource of 7.2 Tcf gas and 176 Million bbls condensate (P501), with a high case 3U Prospective Resource estimate of 17.8 Tcf gas and 449 Million bbls condensate (P101).
Sasanof is a large, seismic amplitude supported, structural-stratigraphic trap in the high-quality reservoir sands at the top of the Cretaceous top Lower Barrow Group formation on the Barrow Delta within the Exmouth Plateau.
Sasanof-1 will be Western Gas’ first well drilled from its extensive exploration portfolio surrounding the existing Equus Gas Project that contains a discovered resource of 2 Tcf and 42 MMbbl (2C Gaffney Cline2). The Equus Gas Project has a historic exploration drilling success rate of 88%, with 15 discoveries from 17 wells.
Click here for the full ASX Release
This article includes content from Global Oil and Gas, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
VIDEO — Eric Nuttall: Oil Bull Market on Fast-forward Due to Russia/Ukraine War
"I think within the next year we'll see an (inflation-adjusted) all-time high in oil prices," said Eric Nuttall of Ninepoint Partners.
Eric Nuttall: Oil Bull Market on Fast-forward Due to Russia/Ukraine War youtu.be
The war between Russia and Ukraine is undoubtedly a key factor in the oil industry right now.
But as Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, reminded investors, a structural bull market was in place for oil long before the fighting began.
"We were already in a structural bull market before the conflict broke out, and what this is doing is it's fast-forwarding us arriving to the inevitable conclusion," he told the Investing News Network.
"But it's also creating more of a bullish undertone," Nuttall added. "Because now we are impairing the productive capacity of one of the biggest oil producers in the world. (Looking at this purely as an investor), we did not need a conflict in Ukraine with Russia to be putting us into one of the most powerful bull markets in modern history."
With sanctions impacting the movement of Russian oil supply into the market, a key question is which nations may step to fill the gap. Nuttall pointed out that beyond the complex logistics of ramping up production, companies and their shareholders may not want to do so given that they are only just emerging from a bad bear market.
"How do you justify growing when the best investment with your cash flow is to make it free cash flow and then use it to buy back your own stock?" he questioned. "And so there's a mismatch between what the administrative wants out of job preservation and what the owners of shale companies want."
Looking forward into 2022, Nuttall expects more volatility in oil prices. "My conclusion for where we are today is we are drawing from storage globally when we should be putting it in. Demand is going to surge because of seasonality and the pickup in leisure travel business by the summertime," he said. He also expects further restrictions on Russian oil, which he sees aggravating undersupply and low inventories.
Ultimately, Nuttall thinks oil prices will get high enough for long enough that they will destroy demand. The level that will happen at is tough to predict, but he anticipates that it will be meaningfully higher than US$120 to US$130 per barrel. "I think within the next year we'll see an (inflation-adjusted) all-time high in oil prices," he concluded.
Watch the interview above for Nuttall's thoughts on the factors at play in the oil space right now, and what could be next for companies and prices.
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Australia’s oil and gas sector has continued to grow over the years, making a potentially compelling opportunity for investors focused on energy supply.
Australia's oil and gas sector has historically played a significant role in the country's economy, and the nation contributes a modest but important amount to global supply.
Australia is active in many parts of the oil and gas industry, including the production, extraction and export of liquefied natural gas (LNG), liquefied petroleum gas (LPG), crude petroleum and condensate.
They all contribute strongly to the nation's economy, and provide a variety of ways for investors to get exposure to the market. Read on to learn more about oil and gas in Australia and how to invest.
Oil and gas in Australia: Sector performance in recent years
2020 was a historically bad year for the oil and gas sector, with the pandemic causing a drastic decrease in consumption. In turn, this drop in global demand caused prices for oil and gas to plummet.
However, in 2021, the industry experienced a much-needed rebound, with the Dow Jones US Oil and Gas Index (INDEXDJX:DJUSEN) shooting up by 46 percent.
According to a US Energy Information Administration report, global oil consumption was higher than the rate of supply for every quarter of 2021. This contributed to rising crude oil prices across the world.
Looking more broadly, the energy sector performed better than all other industries in the Select Sector SPDRs this past year, bringing a total return of 53.3 percent. Upstream companies — firms that produce, extract and process oil and gas — did particularly well in 2021, gaining 127.4 percent on average.
Oil and gas in Australia: Future outlook for the industry
The oil and gas extraction industry grew well over the last year; in fact, the industry has continued to develop consistently over the last decade. Looking from a purely historical standpoint, this suggests future growth will follow a similar trend, but there are many more factors to consider.
As recovery from COVID-19 continues, the oil and gas industry is predicted to keep stabilising as it has over the past year. The Omicron variant didn’t harm oil and gas demand as many investors had worried it would, and for this reason, the sector could return to normal conditions and exceed its pre-pandemic performance.
It should also be noted, however, that many oil and gas firms reduced their capital expenditure and held off on new investment projects during the pandemic. Because production capacity development stagnated, experts are calling for slower growth in the sector over the next five years.
According to the International Energy Agency, petrochemicals will lead demand growth. This includes LPG and LNG; Australia is a significant producer of these and is on track to be a top producer of LNG specifically.
While consumption of oil outpaced production in 2021, it’s difficult to predict if this trend will continue. There are many uncertainties that play a role in the price of crude oil. However, overall liquid fuel consumption is expected to grow over the next few years, surpassing pre-pandemic levels.
Australia’s oil and gas sector has had significant growth over the last decade, with US$310 billion invested. As mentioned earlier, the country is also on track to become the world’s largest exporter of LNG.
Even though the pandemic temporarily delayed much development, there are many investments and expansions in the works. Additionally, as demand for LNG continues to grow in Asia, many of the key players in Australia’s oil and gas sector have made long-term supply agreements.
Oil and gas in Australia: What to consider before investing
It's important for investors interested in oil and gas in Australia to have an understanding of the global market, but there are also factors specific to the country to keep in mind. Here are a few:
- Key players — Before jumping into Australia's oil and gas market, it's important to know which companies are the key players. The companies with the largest market share are: Chevron Australia, Woodside Petroleum (ASX:WPL), Shell Energy Holdings Australia, ExxonMobil Australia, Santos (ASX:STO) and BHP (ASX:BHP,NYSE:BHP,LSE:BHP).
- COVID-19 implications — While the Omicron variant hasn’t caused the drop in oil prices many investors initially feared, it still may be too early to get comfortable. Many areas around the world have put restrictions in place once again to curb the spread. It’s unknown how this will affect the global oil market in 2022.
- Large hydrocarbon resource — Australia has a significant resource base for hydrocarbons. This means it has a large capacity for producing crude oil, natural gas and natural liquid gas. Because of this, Australia is considered a great prospective destination for global oil and gas investment companies.
- LNG demand growth — Demand for gas energy, mainly led by major Asian countries like China and India, is a good sign for Australia’s gas sector. Thanks to the country’s geographical advantage and production capacity, it has become one of the key players in global LNG output. As demand for this form of energy grows, so will Australia’s oil and gas sector.
Oil and gas in Australia: Ways to enter the market
Australia’s oil and gas sector has continued to grow over the years, and demand for its exports is seen rising. For those interested in investing in Australian oil and gas, there are two main ways to do it.
The first is to invest directly in Australian oil and gas companies. Some of the largest players are mentioned above, and a more complete list can be found by clicking here.
Exchange-traded funds (ETFs) focused on oil and gas are also a popular option. ETFs that are exposed to Australian oil and gas include the VanEck Vectors Australian Resources ETF (ASX:MVR), the SPDR S&P/ASX 200 Resource Fund (ASX:OZR) and the BetaShares Australian Resources Sector ETF (ASX:QRE).
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Matthew Flood, currently hold no direct investment interest in any company mentioned in this article.
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VIDEO — Adam Rozencwajg: "Full-blown Energy Crisis" Started Long Before Russia/Ukraine War
"We're in an energy shortage, we haven't invested in this industry for 10 years," said Adam Rozencwajg of Goehring & Rozencwajg.
Adam Rozencwajg: "Full-blown Energy Crisis" Started Long Before Russia/Ukraine War youtu.be
Tensions between Russia and Ukraine have thrown oil and gas prices into focus, but an energy crisis has been brewing for much longer than the war has been going on.
Adam Rozencwajg, managing partner at Goehring & Rozencwajg, said energy market tightness has been an issue for some time and won't abate even if relations between the two countries improve.
"What I would point out is that the current crisis in Ukraine is not the cause of high energy prices today," he told the Investing News Network. "It's the catalyst that really forced prices up a lot higher, but we were very, very tight beforehand and we're going to be very, very tight here after hopefully some of the situations resolve themselves."
Although this reality is becoming more apparent, Rozencwajg noted that many haven't woken up to it.
"We're in an energy shortage, we haven't invested in this industry for 10 years," he said. "We had abundant cheap oil and natural gas because of the shales a decade ago — we took that advantage and we squandered it to a certain extent, or to a large extent, and now it's really coming home to roost."
Rozencwajg pointed to high-quality US and Canadian oil and gas stocks as potential opportunities for investors, explaining that a de-escalation in the Russia/Ukraine situation could be a chance to buy.
To close, he spoke about two of the biggest misconceptions in the oil and gas space.
The first is that market watchers have consistently underestimated demand, even predicting that 2019 would bring a peak in global oil consumption — in actuality, demand in 2022 will be higher. The second is that US shale supply is not an infinite resource, and the majority of best basins have likely been developed.
"I think it's a very poorly understood market, everyone has left it for dead," he said. "It used to average as high as 30 percent of the S&P 500 (INDEXSP:.INX) at its peak; it got to as low as 1.8 percent of the S&P. Today it's at 4 (percent), so it's still incredibly low, incredibly cheap, no one has any interest, no one's buying the shares."
Watch the interview above for more from Rozencwajg on oil and gas.
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Global Oil & Gas Limited is pleased to announce that Western Gas (“WGC”) has provided an operational update in preparation for rig mobilisation to location on 16 May 2022.
Highlights
- Valaris MS-1 rig is anchored in the Dampier outer harbour and is on schedule to commence tow to the Sasanof-1 location on 16 May 2022
- Western Gas’ drilling operations team have been deployed to the field and are now on board the MS-1 rig undertaking pre-mobilisation checks
- Drilling support vessels commenced logistical operations as scheduled on 9 May 2022, with the transport and loading of drilling equipment and bulk materials to the MS-1 rig
- More than 800m of 18-3/4” marine riser for deploying the Blow Out Preventer (BOP) is being transported to the rig in preparation of deployment at the Sasanof-1 location (water depth of 1070m)
- Drilling operations are expected to commence as planned on 24 May 2022
The MS-1 is expected to take approximately four days to reach the Sasanof Prospect, which is approximately 200 km northwest of Onslow, Western Australia, following which the rig and support vessels will prepare for drilling the Sasanof-1 exploration well. The well will be drilled vertically to a total depth of 2500 m in 1070 m of water.
Commencement of the drilling operations (jetting 36” conductor) is expected to commence on 24 May 2022, once the rig is on location and anchors have been set.
ABOUT THE SASANOF PROSPECT
The Sasanof Prospect covers an area of up to 400 km2 and is on trend and updip of Western Gas’ liquids rich, low C02 Mentorc Field.
ERCE estimates the Sasanof Prospect to contain a 2U Prospective Resource of 7.2 Tcf gas and 176 Million bbls condensate (P501), with a high case 3U Prospective Resource estimate of 17.8 Tcf gas and 449 Million bbls condensate (P101).
Sasanof is a large, seismic amplitude supported, structural-stratigraphic trap in the high-quality reservoir sands at the top of the Cretaceous top Lower Barrow Group formation on the Barrow Delta within the Exmouth Plateau.
Sasanof-1 will be Western Gas’ first well drilled from its extensive exploration portfolio surrounding the existing Equus Gas Project that contains a discovered resource of 2 Tcf and 42 MMbbl (2C Gaffney Cline2). The Equus Gas Project has a historic exploration drilling success rate of 88%, with 15 discoveries from 17 wells.