ASX-listed Oil Stocks Following the Oil Market Lead- OSH, ORG, and WPL

  • Jun 04, 2020 AEST
  • Team Kalkine
ASX-listed Oil Stocks Following the Oil Market Lead- OSH, ORG, and WPL

Summary

  • Risk on trade is presently propelling major equity indices across the global and domestic front.
  • ASX-listed oil stocks are riding on the back of increasing crude oil prices in the wake of the market speculation that Russia would soon join the OPEC fold to extend the production cut until the end of the year 2020.
  • Russia agreed for an early meet with OPEC and members to discuss the production cut in order to support the oil market, leading to the speculation.
  • The rise in oil prices is briefly supporting the ASX-listed oil stocks with some of them even outperforming the benchmark S&P/ASX 200 Index.

ASX-listed oil stocks such as Oil Search Limited (ASX:OSH), Origin Energy Limited (ASX:ORG), and Woodside Petroleum Limited (ASX:WPL) are showing a strong recovery in the wake of a price rebound in the oil market, which previously remained in a beleaguered situation amid COVID-19 outbreak across the global front, leading to a significant decline in demand.

The oil market tumbled thanks to double whammy – drop in demand and increase in supply. However, OPEC and members are now aiming to persuade Russia to strike a deal which would prompt major oil-producing countries to extend the current production cut of 9.7 million barrels per day until the end of the year.

Also Read: OPEC Anticipates Fall in Demand for Oil- Supply Chain to Match Tune?

Russia has accepted the offer from OPEC and members for an early meet, over which the market is speculating that Russia and OPEC might strike a deal to extend the production cut deadline from June 2020 to December 2020, which in turn, is supporting the oil price, and in tandem, creating a sentiment splash around ASX-listed oil stocks.

After increasing twofold from its recent low, the recent announcement of an early meet between OPEC members and Russia is now acting as the booster, which the market awaited previously, leading to a consolidation in oil in the range of USD 39 to USD 38 per barrel, and the oil market is again under bullish sentiments, propelling ASX-listed oil stocks along.

To Know More, Do Read: EIA Forecasts Brent Crude Oil Prices to Average USD 34 Per Barrel in 2020

 ASX-Listed Oil Stocks Matching Oil Footprints and Considerable Decisions & Developments

After witnessing a considerable fall in the share price from $7.912 (intraday high on 8 January 2020) to the level of $1.808 (intraday low on 23 March 2020), OSH has gained momentum in the past one month and is presently at trading at $3.500 (as on 4 June 2020, 1:15 PM AEST), close to 2x from its recent low.

OSH Shares Suspended on the Papua New Guinea Exchange

On 27 May 2020, the Company announced about the completion of its PNG Retail Offer, which allowed PNG shareholders to subscribe for 1 fully paid ordinary share in OSH at Kina 4.36 per for every 8 existing ordinary shares in the Company, as on 7.00 PM (Port Moresby time) on Thursday 9 April 2020.

However, at present, the acting Chairman of the Securities Commission of PNG has issued orders to suspend the trading of the Company’s share on the PNG exchange over the claim that OSH violated the PNG Capital Market Act by not obtaining approval from the Securities Commission for the PNG Retail portion of its recent fund raising.

As per the Company, it has obtained all relevant and valid approvals for its recent capital raising and is suggesting that at all times it has acted properly and complied with all its legal obligations. OSH now plans to take the matters to the National Court of PNG and strongly defend its position.

Also Read: Oil Search Shifts the Paradigm from Just Cost-Saving to Capital Raising, Completes Institutional Placement

The stock of the Company is following the same trajectory as Oil Search with stock prices plunging considerably from the top of $8.820 (intraday high on 17 January 2020) to the level of $3.750 (intraday low on 23 March 2020). However, post marking a low in March 2020, the stock is currently rallying and is at near a three-month high and trading at $6.100 (as on 4 June 2020, 1:15 PM AEST), which marks a price appreciation of ~ 63 per cent.

Recently, the Company inked a strategic partnership with Octopus Energy- a U.K-based energy retailer and emerging technology business to bring radical changes in the customer experience and bringing down its operating cost while unlocking the future growth.

ORG also decided to acquire 2 per cent interest in Octopus Energy along with a licence in Australia to integrate Kraken- Octopus’ leading operating model and technology platform.

To Know More, Do Read: Origin Energy Poised to Bring Radical Changes in Customer Experience and Cost Measures

Not just ORG, many other energy companies on the exchange such as Beach Energy Limited (ASX:BPT), Woodside Petroleum have targeted their cost structure in order sustain the business amid COVID-19 outbreak.

To Know More, Do Read: Beach Trims Costs, Lowers All Guidance; US Operations Under Pressure of ASX-Listed Oil Producers FPL, ATS, 88E, BYE

  • Woodside Petroleum Limited (ASX:WPL)

The stock of the Company is under a price recovery from the level of $14.930 (intraday low on 23 March 2020) to the present levels of $23.140 (as on 4 June 2020 1:20 PM AEST), up by ~ 55 per cent from its recent low.

During the March 2020 quarter, the Company targeted the capital expenditure by forging plans to reduce ~ 50 per cent of the capital expenditure for the year 2020 while reducing ~ 60 per cent planned investment expenditure.

WPL also decided to postpone the Final Investment Decision related to the Scarborough Pluto Train 2 and Browse projects to take a dagger at the cost structure to wade through the stormy oil market.

To Know More, Do Read: Cost-Cutting, Cash Preservation, Revenue Hedge- New Drilling Tools of Woodside and Senex

During the March 2020 quarter, WPL delivered 24.2 million barrels of oil equivalent, which remained 12 per cent up against the previous corresponding period, despite the damage caused by the Tropical Cyclone Damien.

However, WPL realised 20 per cent lower average price on its product during the quarter against the previous corresponding period.

Return Profile

The domestic market is under a recovery mode with many benchmark indices such as S&P/ASX 200, IT, Financial, recovering from their recent low and showing some interesting developments on charts.

To Know More, Do Read: ASX indices Showing Interesting Developments- Benchmark ASX200, IT, and Financial Index

While these indices are undergoing a recovery amid improved risk appetite, ASX-listed oil stocks are closely following the footprint of the oil market, which is currently riding on speculation that Russia would soon join the fold and ink the deal with OPEC and OPEC+ to extend the production cut until the year-end to support the oil market.

Also Read: Oil Crisis: Should you Buy or Sell Some Oil Stocks?

 

Crude, OSH, ORH, WPL, AXJO One-Month Return (Source: Refinitiv Eikon Thomson Reuters)

Crude, OSH, ORH, WPL, AXJO One-Month Return (Source: Refinitiv Eikon Thomson Reuters)

 

While riding on the back of a surge in the oil market, OSH has delivered a total return of 25.78 per cent during the last one month, ORG has delivered a total return of 17.49 per cent for the same period, and WPL has delivered a total return of 11.47 per cent (as on 3 June 2020).

With the Brent oil futures of surging by 40.10 per cent in the last one month,  the ASX-listed oil stocks- OSH,ORG and WPL have outperformed the benchmark S&P/ASX 200 Index.

 


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