3 things every oil and gas investor must know today

Could Woodside Petroleum Limited (ASX:WPL) be interested in acquiring Santos Ltd (ASX:STO)?

| 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

It's been a big week for local oil and gas investors.

The recent increase in the price of oil has sparked a surge in activity and investor interest. To help you catch up on the action here are three big highlights to know:

1. Shell finally parts from Woodside Petroleum Limited… sort of

The first big news this week was that Royal Dutch Shell had sold its 13.3% stake in Woodside Petroleum Limited (ASX:WPL) for $31.10 per share.

Shell no longer owns a stake in Woodside, but the two remain key partners on the important Browse LNG joint venture.

Shell's floating LNG processing technology is an important development option for the project's off-shore gas fields, but was shelved last year as the LNG market tightened up.

The engineering behind the technology is incredible and I can highly recommend checking out some of the videos on Shell's Youtube channel.

Shell is about to begin using floating LNG production in the Browse Basin at the near-by Prelude joint venture.

2. Could Woodside be interested in Santos?

Woodside's core competency is extracting oil and gas from off-shore, deep water reserves, but the company could consider making a bid for onshore producer Santos Ltd (ASX: STO) according to Morningstar Inc.

This comes in response to the week's other big news that Santos had rejected an earlier takeover bid from Harbour Energy, a company related to energy group EIG Partners.

Bloomberg Markets quoted a Morningstar research note which mused "an opening offer is rarely the best or last action and could also awaken any number of interested parties".

I think it would be a long-shot and Morningstar notes other potential parties could emerge, including current Santos share holder ENN.

Regardless, it's positive to see Santos investors getting redemption after years of gut-wrenching wealth destruction.

3. How to pick a winning oil and gas producer

If you're taking the time to look at oil and gas stocks for your own portfolio this weekend, here are three important points I would suggest:

  1. Build a view of where we are in the commodity cycle for oil and gas.
  2. Know how much energy a company has and how costly it is to get out of the ground.
  3. Know how the company is going to fund its growth plans

Understanding these three elements will give you a sense of a company's opportunity, risk and potential value when picking a winner from ASX listed energy companies.

Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. 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 ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »