Investing in ASX energy shares

Energy shares have the potential to deliver capital appreciation and strong dividend flows, which makes them attractive to many investors.

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What are ASX energy shares?

Companies that generate and distribute the energy we rely on to power our devices are known as ASX energy shares. They include companies engaged in the exploration, production, and sale of oil, gas, electricity, and renewable energy projects. 

The energy sector is vital to the global economy, supplying the fuel that keeps businesses running. ASX energy companies are involved in activities such as: 

  • Finding and producing oil and gas for electric generation and fuel manufacturing. Also used as raw materials in the production of many hundreds of goods  
  • Generating and distributing electricity and natural gas to consumers (both retail and business) 
  • Contributing to the generation of renewable energy through manufacturing components used in renewable energy production or operating renewable energy facilities. 

The energy sector is changing as climate change becomes an increasingly pressing concern. Traditionally dominated by oil and gas companies, the sector is increasingly focused on renewable energy sources as the world transitions from using fossil fuels. 

Traditional energy companies are also embracing clean energy alternatives, transitioning as they recognise the investment potential of renewable energy sources for electricity generation.

Why invest in energy?

The production and distribution of energy are crucial to providing the global economy with the power it needs to function. The energy sector and the global economy are so closely intertwined that some economists use the values of oil and gas to gauge the economy's health. 

Energy is essential – required for almost every human endeavour – and demand for it will only grow as the global population and level of industrialisation increases. The global energy industry generates vast amounts of revenue thanks to constantly rising demand.  

Australia's energy landscape has evolved significantly over the years, diversifying its energy sources beyond traditional fossil fuels to include renewables like solar, wind, and hydropower. This shift not only aligns with global sustainability goals but also offers potential investors a broader spectrum of choices.

The Australian energy sector encompasses a diverse array of sectors that can allow investors to pursue different goals. There are blue-chip options, growth companies, income opportunities, and high-risk exploration and start-up companies.

Top energy stocks on the ASX

There are 183 ASX companies in the energy sector, ranging from multibillion-dollar producers and distributors to small-cap explorers. 

This offers investors a broad range of potential investments to choose from, including investment stocks such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Soul Patts has ties to the energy sector through its significant investment in New Hope Corporation Ltd (ASX: NHC), which has operations spanning coal mining, exploration, and oil. 

Here are three top ASX energy stocks ranked by market capitalisation from high to low. 

Company Description
Woodside Energy Group Ltd

Petroleum explorer and producer, and a top 10 global independent

energy company 
Santos Ltd (ASX: STO)Australia's largest natural gas supplier with a portfolio of LNG and oil assets
Ampol Ltd (ASX: ALDIntegrated energy company primarily involved in the marketing and

distribution of petroleum products. 

Woodside Energy Group

Woodside Energy is an Australian petroleum exploration and production company. Established in June 2022 when Woodside and BHP Petroleum merged to create a global energy company, Woodside Energy is a top 10 global independent energy company by hydrocarbon production. 

The company has three pillars – oil, gas, and new energy. With more than 35 years of operations in Australia, Woodside Energy's global portfolio includes assets in the Gulf of Mexico and Trinidad and Tobago. 

In 1HFY23, Woodside reported a net profit after tax (NPAT) of US$1.7 billion, with operating revenue rising 27% on the prior corresponding period. Production for the half was a record 91.3 million barrels of oil equivalent. 

The company has made progress on proposed new energy projects and is actively marketing hydrogen offtake from its proposed liquid hydrogen project in Oklahoma. A final investment decision on Woodside's Australian solar project is expected to be made in the second half of the year. 


Santos is a natural gas supplier. Already Australia's biggest domestic gas supplier, Santos aims to be a leading Asia-Pacific LNG supplier. With a portfolio of LNG and oil assets, Santos has five core assets located in Australia and offshore. 

Locations include the Cooper Basin, where Santos operates Australia's largest onshore oil and gas field development spanning South Australia and Queensland, and the Carnarvon Basin in Western Australia. In 1HFY23, Santos reported strong free cash flow and an underlying profit of US$801 million. The company paid interim dividends of US$283 million, a 14% increase on the previous year. 

Santos has embraced a new purpose and strategy based on decarbonisation and clean fuels. It will undertake its clean energy transition via Santos Energy Solution, which will provide clean fuel production, decarbonisation, and carbon management services. 


Ampol (formerly known as Caltex Australia Limited) is involved in the wholesale, commercial, and retail supply of fuel products, including petrol, diesel, and gasoline. It has a refinery in Queensland that processes crude oil into various petroleum products. Ampol also produces and distributes lubricants under various brands, catering to automotive, industrial, and commercial applications. 

Ampol delivered a strong result in 1HFY23 with NPAT of $79.1 million. Total sales volumes increased 25% on the prior corresponding period. 

The company is pursuing a strategy to build a more resilient business via growth in non-fuel and international earnings. In 2022, Ampol acquired Z Energy, a New Zealand transport fuel company. This was an important step in Ampol's international growth strategy, with the company reporting that synergies flowing from the transaction have been delivered. 

Pros of investing in ASX energy shares

Vital service: ASX energy companies provide the electricity used to power homes and businesses and the fuels used to power transport. They play a vital role in the functioning of the economy. 

Growing demand: Energy consumption has increased exponentially since the 1950s and shows no sign of slowing down.1 Demand grows across many countries as people get richer and populations increase. 

Commitment to reducing emissions. The commitment to reducing emissions has gained momentum, meaning there is a shift away from traditional power generation methods and a move towards electrification and renewables.  

And the disadvantages…  

Volatility: Geopolitical tensions can cause the oil price and the prices of gas and electricity to skyrocket. This means energy shares can be volatile, as we have seen over the past year.

Geopolitical risk: Geopolitical tensions can affect more than the price. They can result in entire projects being sidelined or halted where the territory is unstable. 

Profitability: Profitability in the energy sector is tied largely to the price of energy and inputs such as coal and oil. Nonetheless, the price of energy shares is typically relatively stable, and energy companies frequently pay dividends.

Are ASX energy stocks a good investment? 

The wide variety of Australian shares in the energy sector means there are options to suit most investors. Those interested in new technology and the transition to green energy may choose renewable energy stocks

For investors with a high-risk appetite, small-cap exploration companies may be attractive. Large-cap energy producers may fit the bill if you are after dividends. The energy stock that is right for you is the one that fits your investment strategy and financial situation. 

For those who want exposure to the sector as a whole, an exchange-traded fund (ETF) such as the Betashares Global Energy Companies ETF (ASX: FUEL) might be suitable. 

Energy companies saw significant earnings growth in FY22 as higher prices resulted from a supply/demand imbalance. The momentum has continued through FY23, and sentiment towards the sector remains buoyant. 

Ultimately, whether ASX energy shares are right for you will depend on your investment goals, risk tolerance, and financial situation. 

Take the time to research the energy companies you are interested in to ensure they fit your financial objectives. Stay on top of market news and seek expert financial advice if required to make your investment decision.

Article Sources


1. Our World in Data, Energy Production and Consumption

This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

To the best of our knowledge, all information in this article is accurate as of time of posting. In our educational articles, a 'top share' is always defined by the largest market cap at the time of last update. On this page, neither the author nor The Motley Fool have chosen a 'top share' by personal opinion.

As always, remember that when investing, the value of your investment may rise or fall, and your capital is at risk.

Motley Fool contributor Katherine O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.