With the rise in oil prices, the market witnessed key energy sector players under spotlight on June 25, 2018. The ones that look interesting and good to hold are discussed herein below -

Woodside Petroleum Limited

WPL details

Business in line to execute on strategy: Woodside Petroleum Limited’s (ASX: WPL) stock climbed up 1.717 per cent on June 25, 2018 after the OPEC meeting outcome wherein the committee accepted to increase oil production level by about 1 million barrels per day. Further, the group has recently revealed an update on its Wheatstone Project wherein it has successfully started Train 2 liquefied natural gas (LNG) production at its onshore facility near Onslow, Western Australia. According to the announcement, Wheatstone's two trains are important additions to the six trains on the Burrup Hub in WA as these will enable WPL to achieve the targeted production of 100 Million Barrels of Oil Equivalents (MMboe) by 2020. Moreover, the group is currently progressing concept definition for Phase 2 of the Julimar-Brunello Project which will tie-back the Julimar field to the existing Brunello subsea infrastructure that is associated with the Wheatstone offshore platform and it will help to accomplish the Wheatstone's production. The next milestone for Wheatstone will be the successful commissioning of the domestic gas plant, targeted in the second half of the year, adding to WA’s strong and secure energy supply. Besides this, the group has extended its one-year extension to its existing worker accommodation agreement at Aspen Karratha Village (AKV). We expect that this extension agreement will strengthen predictability in Aspen Group’s recurring revenue throughout the 2019 financial year.


Business Strategy Roadmap (Source: Company Reports)
  
Group’s RoE and RoIC stood at 3.4% and 2.4% in 1HFY18 while debt to equity ratio came at 0.34x during the same period. In one year, the stock price has risen 18.54 per cent as at June 22, 2018 and is trading close to 52-week high levels ($35.220).  Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 34.900, considering oil price scenario and WPL’s fundamentals.
 

WPL Daily Chart (Source: Thomson Reuters)
 

BHP Billiton Limited

BHP Details

Agreed to sell Cerro Colorado copper mine: BHP Billiton Limited’s (ASX: BHP) stock surged up 1.415 per cent on June 25, 2018 at the back of commodity price movement while the group has recently entered into the agreement to sell its smallest copper mine - Cerro Colorado in Chile to private equity manager EMR capital for total cash consideration of US$ 320 Mn. Of which, US$ 230 Mn relates to the closing transaction, plus US$ 40 Mn relates to proceeds from the post-closing sale of certain Cerro Colorado copper inventory, and another US$ 50 Mn represents to a contingent payment which will be paid in the future. According to the deal, the sale is subject to financing and customary closing conditions and is expected to close during the fourth quarter of the calendar year 2018. Moreover, the group and EMR Capital are committed to working together to facilitate a smooth transition of ownership. BHP lately approved US$2.9 billion in capital expenditure for the South Flank project in the central Pilbara, Western Australia.
 

Production and Guidance for FY18 (Source: Company Reports)

On the other hand, the full year petroleum volumes will touch the upper end of the guidance range, mainly due to increased well performance in the Onshore US fields. However, all major projects are under development and tracking well as per plan. Current ratio and Quick ratio stood at 1.75x and 1.40x, respectively in 1HFY18 while debt to equity recorded 0.49x during the same period. Meanwhile, the stock was up by 46.82 per cent in last one year and was up by 9.49 per cent in the past three months as on June 22, 2018. The stock is currently trading towards 52-week high level; hence we maintain our “Hold” recommendation on the stock at the current market price of $ 32.980, considering that the full-year production guidance remains unchanged for Petroleum, Metallurgical Coal and Energy Coal along with other on-going developments.
 

BHP Daily Chart (Source: Thomson Reuters)
 

Oil Search Limited

OSH Details

Update on Kimu 2 Drilling: Oil Search Limited (ASX: OSH) has recently released an update on Exploration and Appraisal Drilling report for May month. According to the release, the drilling at the Kimu 2 Appraisal Well in Petroleum Retention License (PRL) 8 in the Western province sits at a total depth of 1,943 metres as on 20 May 2018. The objective of Kimu 2 was to test the potential resource upside in the field and assist in selecting the optimal commercialization pathway for the resource. Further, Cores and logs were acquired, and a Drill Stem Test was undertaken over the Alene Sandstone interval, which flowed at a continuous rate of 34.5 million standard cubic feet per day (mmscf/day) over a 72-hour period through a 1" choke. Kimu 2 will be plugged and abandoned as planned. Furthermore, evaluation of the well data as acquired has now initiated and will be utilized to help evaluate options for the potential commercialization of the Kimu Field.


2018 Production Forecast Revised To 23 – 26 MMboe (Source: Company Reports)

Recently, the group has released its outcome of AGM meeting wherein the company has approved several resolutions such as approval of re-electing Mr. Rick Lee, Dr. Eileen Doyle, Ms. Susan Cunningham, Dr. Bakheet Al Katheeri as directors of the company. On the other hand, FIL Limited and the entities became the substantial holder of the group since June 18, 2018 by holding 76,538,532 securities and 5.02 per cent of the voting power. OSH disclosed to ASX that one of its directors, Mr. Peter Botten had a direct interest in the company and acquired 60,416 more ordinary shares via on-market Purchase at an issue price of A$8.55 per share. Meanwhile, the share price has risen 15.49 per cent in the last three months as on June 22, 2018 and trading towards 52 weeks high. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 8.510.
 

OSH Daily Chart (Source: Thomson Reuters)
 

Origin Energy Limited

ORG Details

Eying the renewal sector: Origin Energy Limited (ASX: ORG) has recently announced that it intends to redeem the euro 500 Mn Capital Securities due 2071 issued by Origin Energy Finance Limited and listed on the London Stock Exchange at their first call date (i.e., June 16, 2018) in accordance with the terms and conditions of those securities. Besides this, the group has changed its registered office and principle place of business with immediate effect. Currently, the group is now focussing on the renewable energy sector and aims to be internationally competitive and expects a cash flow from APLNG to Origin in the range of $360-$370 million. Moreover, the group expects capital expenditure for the full year in the range of $360 Mn to $420 Mn with adjusted Net Debt below $7 Bn. On the balance sheet front, current ratio and quick ratio came at 1.05x and 1.01x, respectively in 1HFY18, representing decent liquidity position of the firm.


Positioned for a low carbon future (Source: Company Reports)
 
Furthermore, The Vanguard Group Inc., became the substantial holder of the group since June 20, 2018 by holding 88,086,472 securities and 5.008 per cent of the voting power. Meanwhile, the stock was up by 40.87 per cent in one year and by 5.77 per cent in last three months. We give a “Hold” recommendation at the current market price of $9.89 as the stock is currently trading close to its52-week high level.
 

ORG Daily Chart (Source: Thomson Reuters)

 
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