Oil and natural gas stocks on the ASX could benefit from the commodities’ price movements, as experts are calling for continued price volatility in the global oil and gas market in 2024.
According to the Australia Institute for Petroleum, crude oil is purchased using US dollars, making it important to track oil’s price movements in the currency. This also means investors should keep an eye on the exchange rate for USD to Australian dollars.
Thanks to factors including Saudi Arabia’s voluntary oil production cuts and a drop in US commercial crude oil inventories, WTI crude prices rose to US$91 per barrel this past September. However, concerns over worldwide oil demand growth and rising global inventories pushed prices down to a low of US$69 in December.
In the first half of 2024, oil prices were riding an uptrend spurred on by rising tensions in the Middle East amid tightening supplies. Peaking at a high of US$86 in early April, demand side challenges once again weighed down crude oil prices to US$73 per barrel in early June.
As Trading Economics reports, crude oil prices are on the rise in late June as the odds of a wider regional conflict threatens the breakout around the Israel-Hamas war in the Middle East. WTI crude is up over US$80 per barrel as of June 28, for a 15 percent gain for the first half of the year. This is welcome news to Australian oil companies.
After a sharp decline lasting six months from November, natural gas prices are surging. The earlier decline was attributed to a shift in mature markets, such as the Asia Pacific region, Europe and North America, which are experiencing reductions in gas demand as they sought alternatives like renewables and pursued improved energy efficiency.
This latest price rise for natural gas is coming from increased demand to power air conditioning during above normal temperatures, according to Trading Economics.
Looking further into 2024, the US Energy Information Association sees oil prices averaging US$84 per barrel and Henry Hub natural gas prices rising from US$2.12 per million British thermal units (MMBtu) in May to US$3.30/MMBtu in December.
With compelling reasons to enter the oil and gas sector, what’s the best way for Australian investors to get exposure? The biggest ASX oil and gas companies by market cap are one place to start. Data for the list below was obtained on June 28, 2024, using TradingView’s stock screener. All market cap and share price data was accurate at that time.
1. Woodside Energy Group (ASX:WDS)
Market cap: AU$53.58 billion; share price: AU$28.21
As the biggest ASX-listed oil and gas stock by market cap, Woodside Energy Group leads the country in natural gas production and is considered a pioneer in Australia’s liquefied natural gas (LNG) industry.
In June 2022, Woodside Petroleum merged with BHP’s (ASX:BHP,NYSE:BHP,LSE:BHP) oil and gas business to form Woodside Energy Group. The new company’s natural gas production accounts for 5 percent of global LNG supply. With its expanded portfolio, Woodside achieved quarterly revenues of US$2.97 billion for Q1 2024 ended March 31.
The company reported in June that it achieved first production at the Sangomar project in Senegal, the country’s first offshore oil project. Its stand-alone floating production storage and offloading facility has a nameplate capacity of 100,000 barrels per day. Woodside will continue ramping up production throughout the year.
2. Santos (ASX:STO)
Market cap: AU$24.85 billion; share price: AU$7.66
Australian energy company Santos is the country’s second biggest oil and gas producer. The ASX-listed firm supplies its products to markets located across Australia and Asia.
In February 2022, Santos partnered with SK E&S and others on carbon capture and storage projects in Australia.
“Just as Australia has been a reliable energy producer for Asian economies for more than half a century, there is an enormous opportunity for Australia to be at the forefront of helping them decarbonise using our natural competitive advantage in carbon storage resources and knowhow,” said Santos CEO and Managing Director Kevin Gallagher last November.
In its report for Q1 2024, Santos highlighted significant free cashflow of US$692 million and sales revenue of US$1.4 billion. In May, the company secured a binding 10 year LNG supply and purchase agreement with Japan’s Hokkaido Gas Co. (TSE:9534) for approximately 400,000 tonnes of LNG per year starting in 2027.
3. Viva Energy Group (ASX:VEA)
Market cap: AU$4.98 billion; share price: AU$3.15
Viva Energy Group owns the Geelong oil refinery and distributes Shell-branded (LSE:SHEL,NYSE:SHEL) fuels throughout Australia. The firm oversees a vast network of over 1,300 Shell and Liberty service stations nationwide.
In its 2023 full-year report, Viva Energy reported a year-on-year increase in fuel sales of 9 percent for the period, as well as a 33 percent increase in earnings before interest, taxes, depreciation and amortization (EBITDA) for its Commercial and Industrial segment to reach a record AU$447.5 million. Its Convenience and Mobility segment posted an EBITDA of AU$232.2 million.
In its Q1 2024 operating update, Viva Energy, highlighted that its Commercial and Industrial segment delivered another quarter of record sales volumes, up by 11.7 percent over the same quarter last year. The company attributed the growth to strong demand from the aviation, resources, and agriculture sectors along with new business secured last year such as the Australian Defence Force.
4. Beach Energy (ASX:BPT)
Market cap: AU$3.36 billion; share price: AU$1.49
Oil and gas exploration and production company Beach Energy has a diverse portfolio, with onshore and offshore oil and gas production in five basins across Australia and New Zealand.
Last year, the company made gas discoveries at both Tarantula Deep 1 and Trigg Northwest 1 as part of its ongoing Perth Basin gas exploration campaign.
In its 2024 half-year fiscal report, Beach Energy posted AU$941 million in sales revenue, up 16 percent year-over-year. This was despite production decreasing by 11 percent for the same period to 8.8 million barrels of oil, which was attributed mainly to lower customer gas nominations.
Looking ahead the company is targeting early calendar year 2025 for first gas production at its Waitsia gas plant, which is currently under construction.
5. Karoon Energy (ASX:KAR)
Market cap: AU$1.43 billion; share price: AU$1.83
Karoon Energy is focused on continued company growth through a broad pipeline of exploration and development projects in Brazil, including its producing Baúna and Piracaba oil fields.
In December, Karoon completed its acquisition of interests in the US Gulf of Mexico from LLOG, including a 30 percent working interest in the Who Dat and Dome Patrol oil and gas fields and associated infrastructure, as well as a nearly 16 percent working interest in the Abilene field and varying interests in adjacent exploration acreage.
In its Q1 2024 report, Karoon outlines production of 3.11 million barrels a day, up 18 percent over the previous quarter. This resulted in sales revenue of US$196.6 million. The company’s guidance for its calendar year 2024 production stands at between 10.5 million barrels of oil equivalent and 12.5 million barrels of oil equivalent.
FAQs for oil and gas investing
What is crude oil?
Crude oil is a mixture of hydrocarbons in liquid form that is found in natural underground reservoirs in the Earth’s crust. This petroleum liquid is refined to produce a variety of energy and industrial products, including asphalt, diesel and jet fuels, gasoline, heating oils, lubricants and propane.
Does Australia have oil?
Geoscience Australia states that Australia hosts about 0.3 percent of global oil reserves.
“Most of Australia’s known remaining oil resources are condensate and liquefied petroleum gas associated with giant offshore gas fields in the Browse, Carnarvon and Bonaparte basins,” according to the government agency.
Where does Australia get its oil?
In addition to producing it domestically, Australia receives oil imports from Singapore, South Korea, China, Malaysia and India, because Australia’s domestic oil production does not cover its oil consumption.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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