Have investors got it wrong on Santos Ltd and Origin Energy Ltd?

Despite a recent rally, the share prices of Santos Ltd (ASX:STO) and Origin Energy Ltd (ASX:ORG) remain down around 50% over the past year.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In Friday morning trade, shares in leading LNG producers Santos Ltd (ASX: STO) and Origin Energy Ltd (ASX: ORG) are rising on the back of a gain in oil prices to a seven-month high overnight.

While news that OPEC members had once again failed to reach an agreement on a production ceiling should have acted as a dampener on the oil price, this negative appears to have been more than offset by news that US crude oil inventories have declined again.

Stocks exposed to the oil price such as Santos and Origin will understandably fluctuate with movements in the oil price, however perhaps investors have been paying too much attention to the oil price and not enough attention to the embedded value in their respective LNG projects…

According to recently published research by Adelaide-based EnergyQuest, Queensland is now exporting more LNG than Russia.

Gross Australian LNG production reportedly increased by around 53% in the March quarter to approximately 10 million tonnes (Mt) thanks to the ramping-up of production from the Santos and Origin-backed LNG projects, GLNG and APLNG.

With both GLNG and APLNG located in Queensland this has led to the sunshine state overtaking Russia in LNG export volume terms – Queensland exported 3.8 Mt for the quarter compared to 2.5 Mt from Russia.

Of particular importance for investors was EnergyQuest's findings that:

"Queensland's LNG projects have all ramped-up more quickly than expected and are near or exceeding nameplate capacity, the whole process has been very well managed with little apparent market disruption."

Despite solid gains in recent months, the share prices of Santos and Origin remain down significantly over the past 12 months, 46% and 58% respectively. While the oil price and growing global supplies of LNG are key inputs into the long-term profitability of Santos and Origin, it's possible that there remains value at current share prices.

Motley Fool contributor Tim McArthur owns shares in Origin Energy Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Down 14% in 2024, why is the BHP share price sliding again today?

ASX 200 investors are bidding down the BHP share price on Wednesday.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Resources Shares

These ASX 200 mining stocks could rise 40% to 50%

Analysts think these miners are dirt cheap at current levels.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Fortescue share price leaps 5% as electric machinery makes a milestone

Fortescue is charging ahead with its electric mining ambitions.

Read more »

rising mining asx share price represented by happy woman miner in hard hat
Resources Shares

Why the BHP share price crushed the benchmark this week

BHP shareholders enjoyed a rewarding week.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Dividend Investing

Here is the profit forecast to 2026 for BHP shares

Let’s unearth how much profit this miner could make.

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Why are ASX 200 mining shares smashing the benchmark on Wednesday?

Rio Tinto, BHP and Fortescue shares are all charging higher today.

Read more »

Two miners standing together.
Resources Shares

Why is the South32 share price getting battered today?

ASX 200 investors are bidding down South32 shares today.

Read more »