Top 3 Best Performing Oil Stocks to Consider in 2021
It has been a shaky start for the ASX this week. Today, the ASX dipped by 0.6% at the time of writing this piece. RBNZ’s rate hike seems to have triggered a shift in momentum which has resulted in the banks and travel stocks taking the hit.
A2 Milk shares were the worst performing today as the stocks dipped over 7%, while CBA dropped by 2%. Travel stocks Webjet and Flight Centre have each dropped by over 6%.
Oil stocks have been bullish recently as oil and gas prices have skyrocketed. The oil shortage crisis impacting the UK and Europe has pushed up oil demand and therefore oil prices. With the demand expected to sustain as we approach winter in the Northern Hemisphere, oil prices are expected to be bullish.
Our List of Top Oil Stocks in ASX
Santos Limited (ASX: STO)
Santos Limited is one of the largest Oil producers in Australia. Following their merger with Oil Search, it will become the biggest Energy play in Australia. It will have an Enterprise Value of $21 billion.
Santos has five principal assets that are located in the Cooper Basin, Queensland and NSW, Papua New Guinea, Northern Australia and Timor-Leste, and Western Australia. The company produces natural gas, such as liquefied petroleum gas, ethane, methane, coal seam gas, liquefied natural gas, shale gas, and condensate, as well as oil.
When we look at Santos’ revenue segments, we see that it is extremely well diversified. Cooper Basin, Queensland & NSW, and Western Australia all have similar revenue generation numbers – all over a billion dollars each. This diversity ensures production is not reliant on the smooth operations of a single asset – reducing idiosyncratic risk in the long-term.
Last month, Santos reported their H1 FY2021 financials, reporting record production of 47.3 mmboe and record sales volumes of 53.8 mmboe, free cash flow of US$572 million and underlying profit of US$317 million. The results reflected higher oil prices compared to the corresponding period due to recovery in demand but were offset by lower average LNG prices due to lagged oil-linked pricing in long-term LNG offtake contracts.
In addition to the bullish outlook, Santon also pays a healthy dividend. The dividend yield is about 2% and STO shares trade at $7.43 a share. It is a definitely a one of the top 3 oil stocks to buy now.
Oil Search (ASX: OSH)
Oil Search operates through the PNG Business Unit and Alaska Business Unit. The PNG Business Unit segment engages in the development, production and sale of liquefied natural gas, crude oil, condensate, naphtha and other refined products. The Alaska Business Unit segment is involved in the exploration, evaluation and development of hydrocarbons in the United States of America.
In Oil Search’s first half results for FY21, the firm delivered US$668 million in sales revenue for 1H21. This represents an increase of 7% from the prior corresponding period. The realised price for oil and gas condensate increased 80% from the prior year.
Meanwhile, realised prices for LNG and gas were down 5% compared to 1H20. Oil Search reported Net profit after tax of US$139 million. This is a swing from a loss of US$266 million in 1H FY20. This result beat market and analyst expectations by 30%. As a result, the firm announced an interim dividend of US$0.033 – again beating market expectations.
With the merger with Santos now in progress, the prospects of Oil Search are robust. Oil Search shareholders will own around 38.5% of the merged entity and Santos shareholders will own the other 61.5%.
With strong oil prices, Oil Search is a top oil stock on the ASX. OSH is trading at $4.55 a share.
Woodside Petroleum (ASX: WPL)
Woodside Petroleum operates through North West Shelf, Pluto, Australia Oil and Wheatstone segments. The company had a brilliant interim FY21 result. Sales revenue increased due to higher realised prices. This was driven by the recovery in LNG and oil demand towards pre-pandemic levels. Higher Brent premiums were also achieved on oil sales in the low-sulphur oil market.
Sales volumes increased due to higher purchased LNG volumes from Corpus Christi and increased trading activity. During the half, Woodside generated $1,318 million of cash flow
from operating activities. The company delivered positive free cash flow of $311 million.
A 2021 interim dividend of US 30 cents per share (cps) has been declared. The interim dividend is based on the H1 2021 underlying NPAT of $354 million. This reflects the performance of Woodside’s high-reliability and low-cost operations during the half.
Woodside is one of the best Oil stocks in the world and is one of the top 3 oil stocks on the ASX. WPL shares trade at $25.04 a share with a dividend yield of 2.34%.
