The $6.6 billion listed investment company (LIC) Argo Investments Limited (ASX: ARG) doubled its holdings of Santos Ltd (ASX: STO) shares in 2022.
Argo now has $165 million invested in the oil & gas producer, according to its 2022 annual report.
At Argo's annual general meeting (AGM) this week, managing director Jason Beddow said:
We believe some market trends are now entrenched regardless of disruptions to economies or the economic cycle.
From an energy perspective, the growing shortages and increasing prices have refocused global attention on the importance of energy security, an issue which now sits alongside the need for decarbonisation and affordability.
Beddow said the energy price shock in Europe had alerted investors and governments to the importance of reliable gas production.
He reckons the biggest beneficiaries of rising global demand will be the big oil & gas companies on the ASX. Namely, Santos and Woodside Energy Group Ltd (ASX: WDS).
Argo buys up Santos shares and Woodside shares
Argo purchased another 10.16 million Santos shares in 2022 to take its total holding to 21.1 million shares.
Argo's Santos shares are currently worth $165.67 million based on today's share price of $7.85. Santos shares are up 19% year to date.
Argo also almost doubled its position in Woodside Energy Group Ltd (ASX: WDS) as well.
The fund now owns 3.32 million Woodside shares. They're worth $121.27 million based on today's share price of $36.51. Woodside shares are up 61% year to date.
So, Argo clearly likes the future prospects of both major energy shares, but Santos looks to be its preferred exposure.
A 'global squeeze' on gas til 2025
The International Energy Agency (IEA) released its world energy outlook yesterday.
According to reporting in The Australian, the IEA is tipping a global squeeze on gas supplies and prices until 2025. This is largely due to the Russia-Ukraine conflict.
As per the article, the benchmark European TTF gas contract is projected to remain between $US20 to $US30 per million British thermal units until the mid‐2020s. That's triple historical levels.
The IEA said:
The global supply squeeze has led to record high prices in several gas markets around the world
and the balance is not expected to ease until mid-decade, when large new LNG exports come
onstream.
Federal Budget forecasts show an anticipated 20% increase in retail gas prices in Australia over FY23. It predicts another 20% rise in FY24 as well.
After the Argo AGM, Beddow said: "It's becoming more accepted that gas is crucial in the energy transition," according to the AFR.
He said we may eventually see parallels between gas prices and skyrocketing coal prices.
