Hi Paul, interested in your thoughts on the oil and gas sector over the next 12-24months. There has clearly been a significant rebound and was wondering on the potential upside with all the economic stimulus coming through. To that end, interested in your view on Santos and their pipeline of projects coming.
A: Thanks for the question.
I am a little more cautious about the energy and gas sector. I note the tailwind from stronger global growth. However, OPEC+ has been pretty good at “managing” production to meet demand, and there is still considerable excess capacity. I am not convinced that the oil price is going to get sustainably over US$60 pb. The prospects for the LNG price are probably better.
Of the majors, I prefer Santos (STO) and Woodside(WPL). Under CEO Kevin Gallagher, Santos looks very focussed on its growth projects.
As for the major broker analysts, they largely agree with my thoughts (judging by implied share price upside). Here are the current target prices and implied upsides (source: FN Arena):
Woodside WPL $27.90 vs last price $24.16 15.6% upside
Oil Search OSH $4.43 vs last price $4.00 10.6% upside
Santos STO $7.81 vs last price $7.02 11.3% upside
Origin ORG $5.19 vs last price $4.69 10.6% upside
Beach BPT $2.02 vs last price $1.67 21.0% upside