What’s MMs top pick for oil and gas?

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Question asked 19/11/2022

What’s MMs top pick for oil and gas?

Hi James, Thanks again for all your work at MM. A question about which oil and gas companies to buy. Its commonly said that the world is going through this 'decarbonisation', and as a consequence, there has been under investment in oil and gas (ie less supply). However, the world still has (and will continue to have for a while at least) some dependence on the old world energy while we transition. What are MM's top picks in the oil and gas space to take advantage of continuing demand and declining supply. WDS? Karoon? STO? Wondering best to take advantage of this thematic?

Answer

Hi Josh,

In the large cap space, we prefer Woodside (WDS) over Santos (STO) even though we recently reduced our exposure from 5% to 3%. The acquisition of BHP’s Petroleum business was a game changer for WDS, while STO has a large amount of Capex requirement in the coming years meaning they won’t be spinning off the dividends that Woodside will in the nearer term. So for now, WDS is our preference, but down the track, STO could be a great option – just not yet.

We also own Exxon Mobil (XOM US) in the international portfolio which is another company just spinning off lots and lots of cash and a great way of playing this transition thematic.

Don’t forget Whitehaven Coal (WHC), a position we have just re-entered having sold too early, underestimating the theme you have spoken about.

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Woodside Energy Group (WDS)

LAST UPDATED 18/11/2022 15:46

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