As we come into reporting season, analysts have a pretty good view on where major energy companies lie, given that they report their production and revenue ahead of time.
With that in mind, we've had a look at Macquarie's recent research notes to see how they rank Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS).
Firstly, though, let's have a look at how the stocks have fared so far this year.
Santos shareholders are sitting pretty well, with the stock increasing from $6.17 to $7.07, or 14.6%, over the year to date.
In comparison, Woodside shares are up from $23.59 to $25.85, for a 9.6% gain.
What do the analysts think
Looking at Santos first, the Macquarie team has an outperform rating on the stock and a 12-month price target of $7.77, which would be a 9.9% return from the current share price.
Keep in mind that the company is also expected to pay a 4.7% unfranked dividend yield this year.
Macquarie said it expected Santos to deliver an underlying net profit of US$1.01 billion and free cash flow from operations to come in at US$1.8 billion.
The company's gearing has already been reported at 26.8%, which is slightly higher than the company's target of 15% to 25% the Macquarie team said, but with Santos' Barossa gas project off the coast of the Northern Territory now generating cash flow, "Santos's gearing should re-enter the range in 2026''.
The Macquarie team said that now that Santos had "recovered" from the failed takeover lobbed by the XRG Consortium, the company was "derisking rapidly'', including by bringing Barossa online and soon the Pikka oil project in Alaska.
Follow-up projects could include a final investment decision at Papua New Guinea liquefied natural gas or further development at Moomba in South Australia's Far North, they said.
The Macqaurie team said they'd also like to see "more active trading of certain assets" which could be sold to smaller players such as Beach Energy Ltd (ASX: BPT).
What about Woodside?
When it comes to Woodside, the Macquarie team expects weakness in the share price, with a price target of $25, compared with $25.85 currently.
The 6.2% dividend yield brings this up to almost breakeven.
The Macquarie team expects underlying net profit to come in at US$2.69 billion, with several non-cash items expected to boost the result.
They said the upcoming results could be interesting with regard to whether possible Chief Executive Officer candidates will step up, after it was announced that current boss Meg O'Neill will be leaving to go to BP.
And while Woodside shares underperformed versus Santos in January, Macquarie is warning the company could shed more than its franked dividend amount in value during the reporting season due to its run-up over January.
