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Top 2 Petroleum Companies To Follow – Woodside Petroleum And Santos

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Why has Woodside Petroleum and Santos share price dropped recently?

The main reason for this drop in the share price has been due to recent uncertainly around the oil price that was caused by a production war between Russia and the Saudis. In addition, due to COVID-19, the demand for oil is very weak, since most planes are not flying and people are driving less due to government restrictions. An increase in supply of oil with falling demand has caused the oil price to drop significantly. These factors even caused the oil futures to go negative for the first time in history.

 

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Woodside Petroleum (ASX: WPL)

Woodside Petroleum Ltd (Woodside Petroleum) is a global energy supplier that is specialised in the upstream petroleum sector. Woodside supplies oil and gas and is the largest LNG producer in Australia. Woodside’s market capitalisation is A$21 billion.


What has happened to Woodside’s Petroleum share price recently?

Over the last 6-months, Woodside Petroleum share price has dropped around 33% and is currently trading at A$22.29.


What is the outlook for Woodside Petroleum?

The short-term outlook for Woodside Petroleum is negative. This short-term outlook is based on the challenging operating environment Woodside Petroleum is facing due to COVID-19 and a weakening oil price. However, one positive is that Woodside Petroleum management has hedged 13.35 million barrels of oil, pricing between July and December 2020 at an average price of $33.03 per barrel, which is currently higher than the spot price for oil. Woodside Petroleum FY20 production guidance remains unchanged at 97-103 MMboe.

Looking beyond the short term, the outlook for the global oil price is more positive once the economic environment returns to more normal conditions and issues around COVID-19 fade.

The long-term outlook for Woodside Petroleum is positive. This outlook is based on several long-term projects that should underpin future growth of the company.

Firstly, the developments of the SNE field located on the west coast of Senegal, Africa. Secondly, development of the Scarborough gas field located offshore Western Australia. Finally, the Browse Basin gas field located offshore Western Australia. In addition to these long-term projects, the oil price should strengthen particularly if global economic growth returns in 2021.


Santos Ltd (ASX: STO)

Santos Ltd (Santos) is an Australian petroleum company. The five main petroleum assets that Santos has an interest in are located at the Copper Basin, Queensland, Papua New Guinea, Northern Australia and Western Australia. Santos has a market capitalisation of A$8.4 billion.


What has happened to Santos share price recently?

Over the last 6-months, Santo’s share price has fallen around 36% and is currently trading at A$5.09.


What is the outlook for Santos?

Santos can expect to face some headwinds over the short-term. This assessment is mainly because the outlook for global oil prices is negative. However, Santos may be able to mitigate some of these effects through there hedging activities.
Looking beyond the short term, the outlook for the global oil price is more positive once the economic environment returns to more normal conditions and issues around COVID-19 fade.

The long-term outlook for Santos is positive. This outlook is based on several long-term projects that could underpin future growth. The most exciting project is the Darado-3 project (Santos 80% interest) off Western Australia. Production is estimated to start in 2024-2025 with an estimate of 30,000 barrels per day from each production well.


Overall thoughts

Investors that want exposer to the Petroleum industry could consider Woodside Petroleum and Santos. Especially considering both companies are trading significantly less than their previous highs earlier in the year.


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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