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Your instant 5-share gas portfolio

Recently, Deloitte Access Economics released a report that showed the top 5 industries most likely to boost the Australian economy over the next 20 years. There were few surprises but gas, tourism, agribusiness, international education and wealth management were the industries which made the list.

Gas, which is the preferred energy source to coal, provides a unique opportunity for Australia, its people and companies. Here are five oil and gas companies I’ve added to my watchlist (and some to my portfolio).

Santos (ASX: STO) is an end-to-end oil and gas company that will look to tap into the natural gas shortages of Australia, Indonesia and other countries. Its pays a strong dividend, has a healthy cash flow and has experienced strong top-line growth in the past two years.

As Australia’s biggest oil and gas producer, you’d be mistaken in believing that Woodside (ASX: WPL) cannot get any bigger. It has a number of liquefied natural gas trains, offshore platforms, storage and off-loading vessels that have served the company well. It has a number of long-term opportunities for investors including its huge long-running North West Shelf (NWS) project and its “globally significant” Browse LNG.

Smaller in scale but perhaps bigger in potential is Senex Energy (ASX: SXY). Senex is a diversified energy company with oil and gas operations in the Cooper Basin and coal seam gas in the Surat Basin. Despite its incredible performance in recent years, it’s moderately priced and has plenty of growth potential.

Another company that boasts plenty of long-term potential is Drillsearch (ASX: DLS). Although it carries more debt than Senex, its growth prospects are significant and its sales are jumping. It has operations in the Cooper-Euromanga basins in South Australia and Queensland.

Lastly, another small oil and gas producer is Beach Energy (ASX: BPT). Beach is based in Adelaide and has a number of exploration and production tenements in Australia, USA, Egypt, Tanzania, New Zealand and Romania. Its flagship projects are located in the Cooper/Eromanga basins and in Williston Basin, USA.

Foolish takeaway

Australia’s proximity to Asian markets and abundance of natural resources make a long-term investment in the oil and gas sector very appetizing and is a must for investors looking to take advantage of the established long-term trends in place.

Smaller energy companies can struggle to transition from exploration to production but will team up with larger producers who have infrastructure in place. Each of these producers have strong future prospects but face unique risks, a good strategy is to diversify your holdings across the sector. 

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Motley Fool contributor Owen Raszkiewicz owns shares in Beach Energy. 

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