The ASX energy shares available to Aussie investors are dominated by two major players: Woodside Energy Group Ltd (ASX: WDS) and Santos Ltd (ASX: STO).
Both of them are heavily exposed to energy prices, so whatever happens, they will largely affect both of them in similar ways, in my opinion.
Let's compare them to two of the easiest metrics first.
Image source: Getty Images
ASX energy shares' valuation
There are a number of metrics to measure different businesses. Profit can be impacted by different accounting policies, but it's the bottom line for a company and also dictates how much of a profit reserve there is to pay dividends.
We can look at the price/earnings (P/E) ratio which shows what multiple of earnings the business is trading at. It provides an easy way to compare businesses in simple terms, particularly if they're in the same industry.
Commsec numbers say that Woodside could generate earnings per share (EPS) of $3.19 in FY23. That would put the Woodside share price at 11 times FY23's estimated earnings. It could then generate $2.84 of EPS in FY24, putting the Woodside share price at 12 times FY24's estimated earnings.
Commsec numbers also suggest that Santos could make an EPS of 38.4 cents in FY23 and 84.6 cents in FY24. This would put the business at 8 times FY23's estimated earnings and 8.5 times FY24's estimated earnings.
On valuation terms alone, Santos is a bit cheaper, but they are both trading on a low valuation.
Dividend projections
The dividend could be one of the biggest influencers on which ASX energy share generates the strongest total shareholder returns.
For Woodside, the business is committed to paying a good dividend to investors each year.
In FY23, the current projections suggest that Woodside may pay an annual dividend per share of $2.34, which would equate to a grossed-up dividend yield of 9.75%. Though, in FY24, the grossed-up dividend yield may reduce to 9.5%, though this is still very high.
With Santos, the ASX energy share is predicted to pay an annual dividend per share of 38 cents, which would be a grossed-up dividend yield of 7.6%. In FY24, it could then pay an annual dividend per share of 29.2 cents, putting the dividend yield at 5.8%.
Woodside is the clear winner here.
What about projects?
Both of the businesses are working on projects to grow profit further. Woodside said that with its Sangomar field development phase 1 offshore Senegal, it expects to complete subsea installation and relocate the floating production storage and offloading facility from Singapore, ahead of targeted first oil late in the year.
In Western Australia, the Scarborough and Pluto train 2 projects are now 25% complete and they "remain on track for targeted first LNG production in 2026."
Santos is working on a number of carbon capture storage projects, which can help it produce "abated gas and LNG".
The business points out that Asia Pacific LNG demand is expected to almost double by 2040, according to Wood Mackenzie forecasts.
However, the Australian Financial Review recently reported that Santos' $5.8 billion Barossa gas project in the Timor Sea has emerged as the "biggest target" of the escalated restrictions on gas projects, with the government's newly-agreed restrictions on gas projects.
The AFR reported that the CO2 content of Barossa is around 18%, while Woodside's Scarborough project is a "low-CO2 field".
Foolish takeaway
I think Woodside's higher dividend yield and investments in renewable energy and hydrogen could make it a better long-term pick, even if it's a bit more expensive.
However, if everything goes well for Santos with its projects then it could still perform well.
