With geopolitical tensions easing across the globe, pressure has come off oil and gas prices and as Savanth Sebastian from Commsec suggests, energy self sufficiency in the US could soon turn into energy exports.
Focus this week was on the PNG LNG project coming online ahead of schedule which boosted results for both Oil Search and Santos.
Santos has posted a 24 per cent dip in first half net profit while reaffirming its full year guidance, Origin Energy has seen a rise in its net profit but a fall in its underlying profit over the 2014 financial year and Oil Search Limited
(ASX:OSH) reported a half year net profit jump of 34 per cent to US$152.5 million.
Commentary
To better understand the state of the energy sector FNN spoke to Commsec economist Savanth Sebastian.
What’s your outlook for the energy sector and how it will impact the Australian economy?
Well I think if you take out all the geopolitical risks, it’s very likely that the oil price will ease and ease substantially. You’ve got oil inventories in the US which are lifting; they are becoming a domestic oil supplier and effectively will be exporting as well. At the same time OPEC nations are seeing very solid growth in terms of oil production so it’s very hard to pick the energy market with the political risks that are around. If those political risks garner some traction, particularly around Russia and Ukraine, well that oil price may lift.
How does gas fit into the energy mix?
I think in terms of the energy play, it really comes down to your view on the political side but if you look at, for Australia, in terms of gas pricing it’s very likely that that is going to increase over the next couple of years. We’ll be shipping a lot more LNG out of Australia and that’s going to see us paying prices which are close to international parity prices. The issue around that is certainly one that the government needs to look at because domestic manufacturers will hurt off the back of that.
Results season
Santos Limited
(ASX:STO) has posted a 24 per cent dip in first half net profit while reaffirming its full year guidance. The oil and gas explorer has blamed the hit on net profit on a $67 million impairment charge relating to its withdrawal from the South Sumatra CSG project. Investors were unfazed, with the Santos share price up almost 4 per cent after the announcement was made.
Origin Energy Limited
(ASX:ORG) has reported a rise in its net profit but a fall in its underlying profit over the 2014 financial year. The energy producer’s net profit rose 40 per cent to $530 million while its underlying profit dipped 6 per cent to $713 million.
Oil Search Limited
(ASX:OSH) has reported half year net profit jumped 34 per cent to US$152.5 million. This compares to US$113.5 million for the same period in 2013. The result was largely driven by their liquefied natural gas project which is now up and running in Papua New Guinea. The PNG LNG project has delivered well ahead of schedule and within budget and the revenues are adding to a strengthening balance sheet. The oil and gas explorer says it is undergoing a strategic review to maximise superior returns over the next five years.
AGL Energy Limited
(ASX:AGK) has unveiled its annual results for the 2014 financial year and announced a $1.2 billion capital raising. The energy producer’s net profit jumped 52 per cent to $570 million while its underlying profit slipped 3.9 per cent to $562 million.
Gas expansion
AGL Energy Limited
(ASX:AGK) has scored state government approval to use fracking technology to identify coal seam gas at Gloucester in New South Wales. The energy producer says it can now start the Waukivory Pilot to fracture stimulate and flow test four existing has wells located in the Stage 1 area of the Gloucester Gas Project.
Doing deals
Australia’s largest natural gas infrastructure business APA Group
(ASX:APA) is poised to cash in from selling its 33 per cent stake in Envestra Limited
(ASX:ENV). APA will sell its stake to the Cheung Kong consortium as part of the Hong Kong group’s cash takeover offer comprising of $1.32 per share.
Woodside Petroleum Limited
(ASX:WPL) has acquired acreage off the coast of Gabon, a Central African country located on the west coast of the continent. The oil and gas producer has bought a 40 per cent interest in an exploration, exploitation and production sharing contract for Block F15.
