The Woodside Energy Group Ltd (ASX: WDS) share price has been on a roll in 2022 so far. The stock has racked up an impressive 43% gain since the start of this year. At the time of writing, the Woodside share price is $32.56.
So is it blue skies ahead for the newly crowned energy goliath? Allan Gray chief investment officer and managing director Simon Mawhinney thinks so.
In fact, the fundie appears broadly bullish on the energy sector. Though, he's holding particularly high hopes for the S&P/ASX 200 Index (ASX: XJO) energy giant.
Let's take a look at why Mawhinney is backing Woodside to go higher.
Why this fundie is bullish on Woodside shares
The Woodside share price has been gaining this year, driven higher amid the company's merger with BHP Group Ltd (ASX: BHP) petroleum assets.
That's despite notable criticism of Woodside's crown jewel, the Scarborough Project. But the project is one of the many reasons Mawhinney likes the stock.
"[Woodside] has an asset base with long reserve lines, particularly when Scarborough is developed," the fundie said.
The company expects the $17 billion project to be up and running in 2026. And Mawhinney is confident the green energy transition won't have wiped away demand for fossil fuels by then, saying:
We find it very hard to see oil prices falling to [consensus' expectations of] US$70 a barrel.
Especially when you take into account the cost of extracting this; the limited investment that's gone into replacing new supply; and the fact that even in a net-zero 2050 world there will be hydrocarbon consumption that will be needed for decades to come.
All of those together, our expectations for what oil and gas prices are likely to be going forward makes Woodside an attractive investment.
The fundie finds Woodside shares so attractive, in fact, that the energy stock made up nearly 11% of the Allan Gray Australian Equity Fund last month.
It was joined in the fund's top ten holdings by energy stocks Worley Ltd (ASX: WOR) and Origin Energy Ltd (ASX: ORG).
