4 Big Mining and Energy Stocks - 2 to buy and 2 to sell: BHP Billiton, Woodside, Newcrest and AGL

BHP Billiton Ltd 

BHP Details

Strong free cash flow:BHP Billiton Ltd (ASX: BHP) is expected to benefit from the hands-on approach of the board under Ken Mackenzie’s stewardship. BHP has also maintained the guidance for production and unit cost for the 2018 financial year. The group delivered first production from the Los Colorados Extension project and the Olympic Dam Southern Mining Area during the September 2017 quarter while their Caval Ridge Southern Circuit project is on track. The group also enhanced the operated rig count from five to nine in Onshore US during the September 2017 quarter.
 

Improved return on capital (Source:Company reports)
 
BHP divested a small portion of the Hawkville acreage while intends to exit the rest of their Onshore US assets as well. BHP delivered US$12 billion in productivity gains since the last five years and slashed the unit costs by 40%. Accordingly, the group reported a free cash flow of US$12.6 billion, which is the second highest on record. BHP aims their Capex to be below US$8 billion for FY19 and FY20. We give a “Buy” recommendation on the stock at the current price of $26.63


BHP Daily Chart (Source: Thomson Reuters)
 

Woodside Petroleum Ltd

WPL Details

Strong Pluto LNG production records: Woodside Petroleum Ltd (ASX: WPL) reported a decent sales revenue of $914 million for the third quarter of 2017 as compared to $867 million in the earlier quarter. The sales volume as reported by this oil play reached 21.1 MMboe. WPL reported a record production on their Pluto LNG on daily, weekly and monthly basis. The monthly production for July was 3% better than the earlier record set in July 2016. The group also implemented the portfolio LNG sales agreement for delivery of up to 12 cargoes between April 2018 and March 2020. The group issued a US$800 million, 10.5-year bond with a coupon of 3.7% per annum. 

While the group lowered the CY17 production guidance top end point (narrowed to 84–86mmboe from 84–90mmboe) owing to delay in production at Wheatstone T1, the group still expects to benefit from the production going forward. Further, Browse continues to be one of the focus projects for the group. We rate the stock a “Buy” at the current price of $30.24


WPL Daily Chart (Source: Thomson Reuters)

Newcrest Mining Ltd

NCM Details

Decline in gold production: Newcrest Mining Ltd (ASX: NCM) delivered a weakness in gold production of 523koz during the September quarter of 2017 that fell 5.2% against the earlier quarter. But the Copper production rose 28.6% to 17kt as compared to earlier quarter. AISC per ounce margin rose 12.8% to $406/oz during the quarter.
 

NCM early exploration projects (Source: Company reports)
 
The group’s Cadia East PC2 showed the highest quarterly ore production, while PC1 re-started ore production. NCM expects to enhance their gold production in the coming quarters. However, NCM stock rose over 8.1% in the last three months (as of October 27, 2017) and currently trades at a higher level. Given the volatile environment, we put a “Sell” on the stock at the current price of $22.30



NCM Daily Chart (Source: Thomson Reuters)

AGL Energy Ltd

AGL Details
Facing few headwinds: AGL Energy Ltd (ASX: AGL) has delivered over 117% return to shareholders over the last five years against only 77% for the index. The group has recently reiterated its guidance of FY18 Underlying PAT of $0.940-1.040b and continues to seek ways of making energy more affordable for all customers. On the other hand, the clarity on policy and regulatory issues as well as the group’s rising debt remain to be the points of concern. Moreover, AGL stock surged over 10.3% in the last four weeks placing the stock at higher levels (as of October 27, 2017) and we recommend a “Sell” on the stock at the current price of $25.29


AGL Daily Chart (Source: Thomson Reuters)

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