How are ASX oil players coping with volatile crude oil sentiments?

Highlights

• Crude oil is hovering around US$86, the lowest since January 2022.
• Organization of the Petroleum Exporting Countries and its allies’ (OPEC+) decision of a minor production cut raised crude oil prices a bit before plummeting further. 
• Several global factors are contributing to the volatility of the crude oil market.

Crude oil prices are currently under pressure and are hovering around US$86 per barrel (WTI crude), lowest level recorded since January 2022, thanks to uncertainties in the global market.

It seems that the market did not pay much attention to the recent news of OPEC+ producers agreeing to slash the oil output by 100,000 barrels per day (bpd) in October 2022. The latest move from the oil cartel is an attempt to raise the prices. Despite this move, crude oil prices increased only by US$2 per barrel.

Crude oil price has been under pressure due to several global factors like

1. Inflation in Europe: The Eurozone annual inflation value hit a record high of 9.1%, 0.2% higher than previous month's figure. The market expects the European Central Bank to raise rates sharply in its upcoming meet, to curbe inflation. This move could impact the over all the consumption demand. 

2. Lower Chinese demand: China's Zero-Tolerance COVID-19 policy is leading to frequent lockdowns in Chinese cities, impacting energy demands significantly.
3. Global shift towards a greener future: China and other major global economies are working to lower their carbon emissions by adopting green technologies to achieve the goal of net-zero emissions by 2050. This is considered as one of the major headwinds for crude oil demand. 

In China, the government and steel mill operators met last month in "Tangshan", the biggest Chinese steel-producing city, to discuss capacity reduction targets for the rest of 2022 to reduce emissions.

With this backdrop, let us have a look at how ASX-listed oil and gas players are performing:

Woodside Energy Group Ltd (ASX:WDS): The Australian energy giant is working to secure energy supply for Australia and contribute to the country’s GDP through energy exports. The company entered a deal with BHP Group (ASX:BHP) to take over the latter’s petroleum portfolio, making itself a larger, geographically diverse entity with high-quality operating assets. It has established itself as one of the largest global independent energy companies.

Woodside's portfolio includes Liquified Natural Gas (LNG) and oil facilities in Australia and newly acquired oil and gas fields in the Gulf of Mexico and Trinidad and Tobago.

Woodside recently announced that the half-yearly result for the period ended 30 June 2022 highlighted the company’s strong operational performance and higher realised oil and gas prices. Operating revenue rose to US$5,810 million, a 132% gain on a YOY basis. Net profit after tax (NPAT) stood at US$1,640 million.

In its operational highlights, the company mentioned that the delivery of subsea projects (GWF-3, Pyxis Hub etc.) was within budget and ahead of schedule. It also increased production capacity at the Bass Strait, thus enabling it to supply additional gas in the eastern Australian domestic gas market.

Santos Limited (ASX:STO): Santos is a leading prouder of oil and gas (LPG, ethane, methane, CSG, LNG, shale gas, condensate). It caters to the domestic as well as Asian market demand. The company's five core assets is located in Australia (Queensland, Northern Australia, Timor-Leste, NSW, and WA) and Papua New Guinea.

Santos's recent media release talks about its CO₂ storage permits for more CCS (Carbon Capturing and Storage) opportunities. Santos, along with its joint venture partner, will be pursuing the opportunity for potential carbon capture and storage (CCS) in the offshore Carnarvon and Bonaparte basins, off the coast of Western Australia, via permits G-9-AP and G-11-AP.

As per the company’s update, its first CCS project at Moomba, which is 20% complete, will be among the biggest in the world. In addition, the company also updated on its Bayu-Undan CCS project, which entered the front-end engineering and design (FEED) phase earlier this year.             

Horizon Oil Limited (ASX:HZN): The upstream oil and gas company operates a conventional oil portfolio in Asia-Pacific (China and New Zealand). The company strives to fulfil its commitment to building a resilient energy production portfolio and creating value for its shareholders.

Horizon generated a sales revenue of US$108.1 million with an underlying profit after tax of US$24.3 million in FY22. On the operational front, the company started production from six wells at its WZ12-8E project during the second quarter of CY2022, which is 18 months after the Final Investment Decision (FID).

Horizon announced a dividend of AU$0.016 per share to its shareholders.

Buru Energy Limited (ASX:BRU): The ASX-listed oil and gas player has a strong focus on the energy transition. The company’s Rafael 1 well has been a significant conventional wet gas discovery in the Canning Basin. The company produces oil from the conventional Ungani Oilfield.

The company’s portfolio includes certified resources in the Yulleroo Gasfield and a major tight wet gas resource in the Laurel Formation.  

The company expects 2022 to be a year focused on commercialisation and will include the evaluation of the Rafael 1 gas discovery and optimising Ungani oil production.