Trends for Oil and Iron Ore; Look at BPT, OSH, WPL, BHP, FMG, RIO

  • Jan 06, 2020 AEDT
  • Team Kalkine
Trends for Oil and Iron Ore; Look at BPT, OSH, WPL, BHP, FMG, RIO

The Australian export market is mainly dominated by the resources sector, occupying 60% of the total export share in terms of value. The export of resources and energy commodity contributes to a strong correlation with the nominal GDP. If the relationship persists in future, GDP may witness a fall with shrinking export value by FY21.

Comparison of Resource and Energy commodity export earnings and Australia’s nominal GDP

Source: Department of Industry, Innovation and Science and ABS

Resource and energy commodity exports are expected to be ~$281 billion in FY20 before falling to $256 billion in FY21 due to the global economic and financial crisis affecting the export market.

However, the export of crude and condensate remains robust in FY20 at $11 billion due to weaker AUD and rise in production volumes offsetting the plummeting oil prices. The export of oil and condensate anticipated to further drop to $10 billion in FY21 because of recovery of AUD coupling with a further decline of oil prices.

In the milieu of this, it is quintessential to analyse how all the Iron ore and O&G stocks are performing. For the same, we have picked mostly Large-Cap or Blue-Chip companies along with the market cap of $5 billion to $10 billion to give the holistic view of the resources and energy commodity industry.

Good Read: Call for Climate Action – A Parametric Analysis of Australian Mining Sector Initiative and Performance

Beach Energy Limited (ASX: BPT) is an O&G exploration and production company based out in Adelaide, South Australia. BPT has a distinct portfolio with five basins both at onshore and offshore O&G production across New Zealand and Australia.

The production volume of the company increased by 55% from FY18 to 29.4 MMboe in FY19, which is expected to be ~ 27 – 29 MMboe in FY 20, followed by 34–40MMboe annual production in coming five years i.e. FY24.

The stock traded highest at AUD 2.69 on 18th December 2019, increased by 99% from the trading value at AUD 1.35 on 3rd January 2020. This whopping increase in share price is the testimony to the company’s performance where operating cash flow, NPAT and EPS has increased by 57%, 86% and 77% respectively in comparison to previous year FY18.

The stock of BPT traded at AUD 2.665 by the close of market trading on 6 January 2020 and has a Dividend Yield of 0.77% with P/E ratio of 10.260x and EPS of AUD 0.254. Its 52 weeks high and 52 weeks low stand at AUD 2.79 and AUD 1.29, respectively, and has a market cap of AUD 5.93 billion.

Oil Search Limited (ASX: OSH) is one of the largest O&G player in Papua New Guinea (PNG). The group has 29% interest in PNG LNG Project operated by ExxonMobil PNG Limited along with substantial interests in the Elk-Antelope and P'nyang gas fields. OSH has positioned itself well as a long-term, low-cost oil and LNG producer. The group also acquired oil interests in the Alaska North Slope in the United States to balance the gas dominated portfolio.

The production in FY18 decreased by 17% to 25.21 MMboe from the previous financial year and the volume is expected to increase by 15% in FY19 to 27 - 29 MMboe. The consistency in allotting funds towards the exploration and evaluation i.e. around USD 680 – 710 Million in FY19 in line with the previous year allocation of USD 715 million is the testimony to the company’s focus toward drilling programme to explore the future opportunities.

The stock of OSH traded at AUD 7.700 on 6 January 2020 and has a Dividend Yield of 2.59% with P/E ratio of 18.8x and EPS of AUD 0.398. Its 52 weeks high and 52 weeks low stand at AUD 8.46 and AUD 6.3, respectively, and has a market cap of AUD 11.42 billion.

Woodside Petroleum Limited (ASX: WPL) is one of the largest natural gas producer and pioneer of the LNG industry in Australia. WPL is an integrated upstream supplier of energy and produces 6% of global LNG supply with a global portfolio.

The production guidance remains constant to 89-91 MMboe in FY19 with the previous year, which may increase by 9 MMboe to ~100 MMboe in FY20. The production is believed to increase with CAGR greater than 6% from 2019 to 2028.

The stock of WPL last traded at AUD 35.41 on 6 January 2020 and has a Dividend Yield of 5.19% with P/E ratio of 18.01x and EPS of AUD 1.931. Its 52 weeks high and 52 weeks low stand at AUD 37.7 and AUD 30.48, respectively, and has a market cap of AUD 32.76 billion.

BHP Group Limited (ASX: BHP) is a multinational and one of the biggest resources and energy commodity company. It has a diverse portfolio across countries mostly in Australia and the Americas. It produces iron ore, copper, coal and petroleum products to mention few.

The production of O&G has been reduced by 23% from FY18 to 147.3 MMboe in FY19 which is expected to further reduce by 21% to 116 MMboe in FY20. This reduction forecasted in the coming year is due to the decline of production by 11% in September ended 2019 quarter across Crude oil, condensate and natural gas liquids.

Whereas, Iron Ore production has remained almost constant at ~238 Mt in FY 19 and FY18 and forecasted production to increase by a maximum of ~6.32% to 242 – 253 Mt in FY20.

The stock of BHP last traded at AUD 39.41 on 6 January 2020 and has a Dividend Yield of 4.9% with P/E ratio of 17.13x and EPS of AUD 2.286. Its 52 weeks high and 52 weeks low stand at AUD 42.33 and AUD 31.603, respectively, and has a market cap of AUD 115.33 billion.

Fortescue Metals Group Limited (ASX: FMG) is a world-class low-cost iron ore company with advanced infrastructure, innovation and development. FMG holds three iron ore hubs i.e. Chichester Hub, Solomon Hub and West Pilbara Fines in Pilbara region of Western Australia.

The iron ore production of the company has increased by 6.82%, while export witnessed 1.24% reduction in FY19 in comparison to FY18. The company produced around 176.9 Mt and shipped ~167.7 Mt. The shipment guidance is predicted to increase by a maximum of 4.35% to 170-175 Mt in FY20.

The stock of FMG last traded at AUD 10.76 on 6 January 2020 and has a Dividend Yield of 4% with P/E ratio of 7.31x and EPS of AUD 1.47. Its 52 weeks high and 52 weeks low stand at AUD 11.1 and AUD 3.788, respectively, and has a market cap of AUD 33.1 billion.

Rio Tinto Limited (ASX: RIO) is a multinational and one of the biggest metals and mining company. It has a diverse portfolio across 35 countries and six continents with a strong presence in Australia and North America. It produces copious metals and minerals majorly classified into Aluminium, Copper & Diamonds, Energy & Minerals and Iron Ore division.

The iron ore production and shipment of the company’s Pilbara mine has increased by 2.43% and 2.45% respectively in comparison to FY18 on 100% basis. The company produced around 337.8 Mt and shipped ~ 338.2 Mt. The shipment guidance is predicted to decrease by a minimum of 2.42% to 320 and 330 Mt in FY20 on 100% basis.

The stock of RIO last traded at AUD 101.130 on 6 January 2020 and has a Dividend Yield of 4.64% with P/E ratio of 8.86x and EPS of AUD 11.435. Its 52 weeks high and 52 weeks low stand at AUD 106.922 and AUD 71.532, respectively, and has a market cap of AUD 37.63 billion.


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