Oil Sector Play | Woodside Energy

31 August 2022

US markets (S&P 500 Index -1.1%) fell for a third-day in a row as ‘good’ jobs data translated into bad news for stocks – as it gives the Fed added capacity to raise interest rates higher to combat inflation.

US Jobs opening data showed 11.2m available vacancies, 800k stronger than expected, while US consumer confidence came in stronger than expected. Markets will also be watching key non-farm payrolls employment data out on Friday, with a strong print meaning more room for the Fed to lift rates and keep them higher for longer.

All sectors ended in the session in the red, with energy being hardest hit as the price of oil slipped.

European markets (Stoxx 600 Index, -0.7%) closed lower, erasing earlier gains, on deep recession fears induced by a spike in energy prices, coupled with a hawkish outlook from the ECB.

Inflation data in Germany was high reaching a 40-year peak, in line with expectations rising +8.8% year on year.

Woodside Energy (WDS:ASX)

Woodside Energy rose +1.5% yesterday to a fresh 3-year higher after announcing a bumper dividend for the first half of the 2022 financial year.
Net profit after tax jumped 5-fold to $1,640m, benefiting from higher oil and gas prices (double the same corresponding period last year) and a +19% increase in production volumes which included one full month of production from merged BHP assets.

Woodside paid out an interim dividend of US$1.09 per share, and now has a strong balance sheet following strong cash generation over the half. 

We are BUY rated on Woodside Energy as a top-10 oil and gas producer set to pay out attractive dividends assuming normal economic conditions. However, at elevated price levels this comes with a high-risk caveat.

Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.5%) was up on Tuesday, as all sectors except for materials were in the green, partially recovering from Monday’s sell off.

Energy was the best performing sector led by Woodside’s strong result as well as crude oil rising overnight. Wisetech rose +3.8% after confirming rumours it is considering the acquisition of Envase Technologies – which is estimated to be worth ~$500m.

Future iron prices slipped -3% due to concerns in China weighing down on major iron ore miners, while uranium producers were also up strongly.

The New Zealand market (NZX 50 Index, +1.2%) was up strongly as major blue chips did most of the heavy lifting as we cap off another earnings season.

The likes of Spark reached fresh decade highs rising +2.1%, while A2 Milk continued to climb up another +6%.

What Markets will be Watching this Week

Monday
Australia: Earnings from Next DC, Fortescue and Minerals Resources
New Zealand: Earnings from A2 Milk and Restaurant Brands

Tuesday
Australia: Earnings from Woodside Energy, Harvey Norman

Wednesday
Global: Eurozone CPI (inflation data), and China Manufacturing data (PMI)
Australia: Earnings from DGL Group and Atlas
New Zealand: Earnings from Harmony

Thursday
Global: US initial jobs claim data.

Friday
Global: US non-farm Payroll data

US markets (S&P 500 Index -1.1%) fell for a third-day in a row as ‘good’ jobs data translated into bad news for stocks - as it gives the Fed added capacity to raise interest rates higher to combat inflation. US Jobs opening data showed 11.2m available vacancies, 800k stronger than expected, while US consumer confidence came in stronger than expected. Markets will also be watching key non-farm payrolls employment data out on Friday, with a strong print meaning more room for the Fed to lift rates and keep them higher for longer. All sectors ended in the session in the red, with energy being hardest hit as the price of oil slipped. European markets (Stoxx 600 Index, -0.7%) closed lower, erasing earlier gains, on deep recession fears induced by a spike in energy prices, coupled with a hawkish outlook from the ECB. Inflation data in Germany was high reaching a 40-year peak, in line with expectations rising +8.8% year on year.

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