The oil and gas sector has certainly been volatile with the conflict in the Middle East.
In this environment, it can be useful to defer to the experts, with Macquarie recently releasing two new research reports: one on an oil and gas junior and one on a major company.
Let's see who they like.
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Strike Energy Ltd (ASX: STX)
Strike shares have returned exactly 0% over the past 12 months, but the Macquarie analysts believe that's about to change.
Key to this is an agreement Strike recently made with Gina Rinehart's Hancock Energy to process the gas from its West Erregulla project through Hancock's Belisama facility.
The deal also included a $30 million loan from Hancock, which Strike will use to support its share of pre-development activities.
The West Erregulla joint venture is targeting a final investment decision in FY28, with first gas expected in CY29.
Macquarie said the deal was "a key turning point", materially improving the development pathway for the project.
The broker said:
In our view, this was particularly important given Walyering's limited life (we forecast production to end Dec-28 quarter for now) – with West Erregulla targeted online mid-CY29. The market seems to be under-appreciating the significance of this for now & it may take some time for institutional interest to return to STX.
Macquarie said that with the Hancock money and debt funding from Macquarie Bank, the company was adequately funded.
The broker has a price target of 15 cents on Strike shares compared to 11 cents currently.
Santos Ltd (ASX: STO)
Santos shares have performed well over the past year, up 24.4%, but the team at Macquarie thinks they have further to run.
The broker's analysts said in their research note on the company that the third quarter will be a "watershed" period as Santos moves into the harvest phase after a long period of investment.
They added that the strong commodity pricing environment was providing a favourable earnings backdrop, with the disruption in the Middle East continuing.
Macquarie is forecasting earnings per share to be 40% higher for the calendar year, driven by higher realised prices and increased LNG shipments; however, they noted that their estimate was 31% above consensus.
Macquarie has an outperform rating on Santos shares and a price target of $9.35 compared to $8.58 currently.
Conversely, Macquarie has a neutral rating on Woodside Energy Group Ltd (ASX: WDS) and a price target of $32.40 compared to $31.77.
Santos is valued at $27.8 billion.
