- Volatility in oil prices has had an impact on oil and gas stocks
- These companies declared their earnings, reflecting the movement of oil prices
- CHI and ALD announced their half-year results, but NZO declared its full-year results in August
On 5 September, OPEC and other countries made a small cut in their oil supplies, saying that due to decreased demand, the prices of oil are moving down. In fact, oil prices have been very volatile in recent months. While the fear of recession has pushed them down from time to time, the loss of Russian oil due to sanctions over its invasion of Ukraine helped them soar. At one time, Brent was up US$123. The prices have fallen in recent weeks due to recession fears.
While concerns about the loss of the Russian supply persist, of late, it’s the fear of the recession that has taken precedence. Globally, the recession is being looked at as a possibility due to high inflation fuelled by energy costs. This has led to a drop in oil prices all over the world from the June highs.
Let’s examine how New Zealand oil and gas companies are faring against this background.
NZO is a deepwater oil exploration company with operations in several locations. On 26 August, it announced its FY22 results, in which it reported a 133% jump in revenue with an NPAT of NZ$25.7 million. The annual production was also up 110%, to 1.2 million barrels of oil. Five wells were drilled in FY22 and the acquisition of Amadeus Basin assets provides it an impactful entry into the Australian market.
According to the release, the Company made the highest profits in seven years. Strong performances from new assets and higher oil and LPG prices contributed to the NPAT growth of NZ$25.7 million as compared to a loss of NZ$43.3 million the previous year.
The main contributor to the revenue increase was the newly acquired Amadeus Basin in Australia. In addition, new production from the Mahato field in Indonesia, higher oil prices in Maari and Mahato, and a continued strong sales performance at Kupe, all added to the revenue growth. NZ’s oil and gas subsidiary, Cue Energy Resources (ASX: CUE), contributed a significant NZ$47.6 million to revenue.
The Company reported growth in production due to the Kupe gas fields in Taranaki, New Zealand. It also increased due to the Amadeus Basin Acquisition.
While in Australia, the Amadeus Basin Joint Venture is on track for multiple re-completions and is reviewing the potential for additional infill wells, in Indonesia, 10 more oil production wells are planned, which will double its production. The group will look for acquisition activities in FY23.
On 7 September, the stock was trading up 1.15% at NZ$0.440, at the time of writing.
Ampol Limited (NZX:ALD; ASX:ALD)
ALD was established in 1900 as an Australian company. In its half-year results, it reported record group RCOP EBIT, growth across Lytton, F&I Australia, and F&I International. Gull New Zealand is not operational due to its sale. Ampol recorded a statutory after-tax profit of NZ$695.9, including a product loss of NZ$64.7 million. This compares well with the half year of 2021. ALD also declared an interim dividend of 120 cps for the first half, in line with its dividend policy of 50-70% dividend payout of RCOP NPAT.
In the half year of FY22, Ampol’s strategy was focused on three elements -enhance, expand and evolve. Out of these, evolving its business to build foundations for energy transition is the most important element.
Furthermore, ALD said that since the end of the half year, global crude and product markets have experienced significant volatility, falling in mid-July. This led to an easing of Lytton Refiner’s margin. Demand and supply have witnessed some changes due to the changing global scenario. While on the demand side, global inventory levels are low, July saw a recovery in fuel margins as refined product costs eased.
The easing in refined product costs is also expected to release working capital and improve cash flows in the second half.
On 7 September, the stock was trading down 3.21% to NZ$36.20, at the time of writing.
Channel Infrastructure NZ Limited (NZX:CHI)
CHI is New Zealand’s largest fuel infrastructure business, based in Northland. It released its financial results for the six months ended 25 June on 25 August.
The financial results reflected the refinery’s shutdown for three months. The earnings also reflected jet demand at the highest level since 2019. Accordingly, the financial performance of the company showed a strong EBITDA margin from continuing operations. Net assets were up 5% from NZ$1.33 to NZ$1.40 per share.
A strong retail bond issue was completed in May 2022, and bank refinancing is in process.
Most importantly, the Company announced a return to dividends in March 2023 as cash flows increased.
Naomi James, CEO of CHI, said that the financial results reflected the transition to Channel Infrastructure on 1 April, and the stable earnings and cashflows were due to customers and contracts. The company’s performance was in line with the FY22 guidance.
On 7 September, the stock was trading down 0.71% to NZ$1.390, at the time of writing.
As the world continues to grapple with fluctuations in oil prices, New Zealand oil and gas companies are facing challenges related to it. Additionally, supply chain disruptions are adding to their woes.
The results announced in August by three major oil and gas companies reflected the impact of rising prices, but with Brent moving down, the impact is yet to be felt on the financial performance of these companies.