The S&P/ASX Energy Index is trading well-below pre-covid levels despite oil prices running to 7-year highs.
While local oil and gas plays have historically underperformed their global counterparts, the recent divergence is the largest we've seen since 2016.
Morgans reiterated an Add rating for Woodside with a $30.55 target price (18% upside).
Woodside’s fourth quarter 2021 and 2022 guidance both came in ahead of the broker's expectations.
The 2022 guidance was “particularly impressive”, with a 92-98m barrels of oil forecast versus Morgans’ estimates of 91m barrels.
“Woodside is already in strong shape heading into 2022, while the combination with BHP Petroleum will materially boost the company’s fundamentals,” the report said.
Santos was given an Add rating with a $9.15 target price (24% upside) heading into a “catalyst-heavy 2022”.
The company’s December quarter results topped consensus expectations across revenue and production metrics.
Morgans said it sees an opportunity to “beat market expectations on synergies in its merger with Oil Search (ASX: OSH) given the level of capital inefficiency we saw at Oil Search.”
Santos could also be poised for growth with final investment decisions due at its Barossa project in mid-2022 and Pikka Phase 1 project in the first half of 2022.
Both Santos and Woodside report their FY21 results on 16 February 2022.
Finance Writer & Social Media
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