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Why MM has reduced our energy exposure

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Why MM has reduced our energy exposure

Peddling over used and outdated cliché quotes seems to be weak reason to get out of the energy stocks. Is there some technical data which is making that call also? If so can you share those charts?

Answer

Hi Robert,

  1. We reduced our exposure to the Oil Sector given Crude Oil reached our target, as they say “Plan your trade & trade your plan”.
  2. ….and “There is no better remedy for high prices, than high prices themselves” – there is no market that quote is more relevant than in Oil, with higher cost shale production in the US highly incentivised at current prices.
  3. In terms of Santos specifically, we would have expected more from them given the tailwind from Crude, however they have a very large funding task ahead of them following the acquisition of OSH, and there is some complexity around asset sales to achieve this which the market is grappling with. Woodside (WPL) has more leverage at the moment to Oil & Gas prices, which we expect to stay relatively high given the energy transition the world is undertaking (notwithstanding the Russian /Ukraine situation). Our preferred exposure therefore is Woodside (WPL) and being a BHP share holder we will be allocated some WPL shares, which we plan to build on.

We still hold some exposure to energy through WHC & BHP.

Ironically we received some push back from subscribers when we bought the likes of Santos (STO), Exxon (XOM US) and Whitehaven Coal (WHC) due to their environmental footprint and now today we are feeling the same as we close out positions into strength and panic buying across the Energy Sector.

 

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ASX 200 Energy Sector v Crude Oil
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