Stocks that are Invigorating the ASX Charter – WPL, OSH, STO, ORG

  • May 19, 2020 AEST
  • Team Kalkine
Stocks that are Invigorating the ASX Charter – WPL, OSH, STO, ORG

S&P/ASX 200 Energy which settled at 12,095.10 on 22 January 2020 reached 5022.70 on 23 March 2020. The index provided a YTD return of -35.01%. However, a significant improvement was seen in the index during its QTD performance where the sector delivered a return of 27.14%.

The impact of COVID-19 on the sector was significant; however, the industry bounced back from 24 March 2020, and it has continued the upward trend. On 19 May 2020, the energy sector ended the day’s trade at 7,475.1, up 4.21% from the previous close.

In this article, we would look at some of the players from the energy sector and cover the recent update and see how their stock performed.

Woodside Petroleum Ltd (ASX:WPL)

Woodside Petroleum Ltd is the pioneer of the LNG industry in Australia and is also the producer of natural gas in the country.

In May 2020, the Company has come up with two significant updates.

WPL and Civmec signed a supply and fabrication contract:

On 11 May 2020, the Company awarded a contract for supply and fabrication to WA-based engineering company Civmec for the KGP Interconnector project.

Under this agreement, Civmec would be carrying out the fabrication of structural steel, piping, a module & skids situated inside the Pluto LNG Plant and these would then be used for supporting the interconnector project.

The Interconnector will carry gas from Pluto LNG facility of WPL to the North West Shelf Project’s KGP through a 5 kilometres pipeline that is built along the current Dampier to Bunbury Natural Gas Pipeline corridor.

NEDO approved WPL to commence hydrogen feasibility study with three Japanese companies:

In an update from 7 May 2020, WPL highlighted that it had received approval from Japan’s New Energy and Industrial Technology Development Organization (NEDO) that WPL, along with JERA Inc, Marubeni Corporation and IHI Corporation, would together be undertaking a hydrogen feasibility study.

The feasibility study aims to study the extensive export of H2 as NH3 for use decarbonising coal-fired power making in Japan. By 2030, Japan aims to reduce greenhouse gas emissions by 26% from the 2013 levels and would join other nations in requiring lower carbon energy.

Stock Information:

By the market closure on 19 May 2020, WPL shares settled at AU$22.590, up 4.149% from the previous close.

Oil Search Limited (ASX:OSH)

Oil Search Limited is into the business of exploring, developing as well as producing oil and gas resources. 98% of OSH’s assets are in Papua New Guinea.

The shares of OSH in the past one month have delivered a return of 12.78%.

On 5 May 2020, the Company released its Macquarie Australia Conference Presentation where it highlighted its focus area for 2020. These include:

  • Well-being of its people & the community.
  • Safe & reliable PNG as well as Alaskan operations.
  • Improvement in the liquidity disciplined capital management and simultaneously lessened cost and suspend all discretionary activity.
  • Position the Company well so that it can deliver growth when the market condition permits.
  • It would do a strategic review of seeing new norms and discipline.

During COVID-19, the Company took proactive steps to respond to low oil prices. Some of them include:

  • Reduced headcount in Sydney & Anchorage offices.
  • Reduced salary across the entire business.
  • Targeting another circa 20% cost reduction through improving the operating model as well as supply chain.

To ensure the strength of the balance sheet, the Company in early April 2020, announced US$700 million capital raise. It finalised US$650 million placement & institutional part of the entitlement offer.

OSH also highlighted the strong performance from PNG LNG. The Company did not experience any material impact on the production or disruptions to lifting schedule due to COVID-19 till the date of the announcement.

Stock Information:

By the market closure on 19 May 2020, OSH shares settled at AU$3.220, up 7.333% from the previous close.

Santos Limited (ASX:STO)

Santos Limited is amongst the leading independent oil & gas producers in the APAC region that supply the energy requirement of homes, businesses and major industries throughout Australia and Asia.

The shares of STO in the past one month have delivered a decent return of ~18%.

Recent Update: Macquarie Australia Conference

On 5 May 2020, Santos Limited released its Macquarie Australia Conference presentation where it initially updated that the Company did not report any COVID-19 cases within its operations. However, for safety reasons, the Company has implemented verification controls.

 Business Update Amid COVID-19:

  • 2020 capital expenditure declined by 38% to US$550 million.
  • 2020 cash production costs dropped US$50 million.
  • STO is well-placed in a lower oil price environment.
  • The Company has US$1.15 billion as cash along with US$1.9 billion in undrawn debt facilities.
  • S&P Global Ratings confirmed Santos’ investment-grade credit rating with a stable outlook.
  • STO delivered strong Q12020 operating performance with free cash flow of US$265 million.

Stock Information:

By the market closure on 19 May 2020, STO shares settled at AU$5.100, up 4.723% from the previous close.

Origin Energy Limited (ASX:ORG)

Origin Energy Limited is amongst the leading energy retailers in Australia. It is the key players in Australia’s energy supply chain.

The shares of Origin Energy in the last one month have delivered a return of 12.27%.

Strategic Partnership with Octopus Energy:

On 1 May 2020, the Company announced its strategic partnership with Octopus Energy to accept its globally distinctive operating model as well as proprietary “Kraken” platform, providing superior customer experience as well as drive a material decrease in costs.

Octopus Energy is the disruptive UK energy retailer and technology company and has a track record of growth as a UK energy retailer.

The Company would be acquiring 20% in Octopus Energy. Thus, would be opening growth opportunities.

In the upcoming 2 to 2.5 years, the Company would be moving its 3.8 million gas client and retail electricity accounts to the proprietary platform. Thus, it would be taking a step ahead towards the reduction in operating and capital cost. The probable pre-tax cash savings in FY2022 would range from AU$70 to AU$80 million and would increase between AU$100 to AU$150 million yearly from FY2024.

Q3 FY2020 Results:

  • Australia Pacific LNG production remained stable during the quarter after the record production in Q2FY2020.
  • Revenue dropped 12% from the Q2FY2020 because of the sales mix, with lower contracted LNG sales. However, it got slightly balanced by higher spot LNG and domestic sales.
  • In the energy market, electricity volume declined 7% as compared to the previous corresponding period.
  • Retail volume declined by 11% because of a drop in the milder weather & lower usage from solar uptake and efficiency along with the lower customer numbers.

Stock Information:

By the market closure on 19 May 2020, ORG shares settled at AU$5.660, up 3.097% from the previous close.

 


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