Ann: Investor Briefing Day 2022 transcript, page-4

WE AUST Business today:
Price cap ‘won’t hurt gas giants’

A domestic gas price cap of between $11 and $13 per gigajoule, as proposed by the Albanese government, would be “immaterial” to the values of Australian energy groups Woodside Energy, Santos and Beach Energy, Morningstar analysts say.

In a note, investment analyst Mark Taylor said only 7 per cent of Woodside’s overall sales revenues were derived from domestic gas sales, with prices considerably below the levels for international sales. Santos has more meaningful exposure.

“We don’t see the expected gas price cap of $11-$13 per gigajoule being particularly relevant to Woodside, Santos, or Beach in any case,” Mr Taylor wrote in a note to clients.

“These companies have largely contracted domestic gas sales and on average at prices struck considerably below the cap level. We understand they have deliberately avoided gouging the market in an attempt stave off this exact type of government intervention.”

On Thursday, Woodside said it could withhold new gas investment on the east coast, and the government would suffer a “black mark” if it proceeded with intervention aimed at cutting prices in the domestic market.

“I think we would struggle to see new investments be competitive with those sorts of price levels,”

Woodside chief executive Meg O’Neill told an investor call in reference to the price caps.

“And that goes for investments within the Bass Strait joint venture as well as things like LNG import facilities. I don’t want to say that that’s not feasible, but the economics become significantly affected with pricing constraints in place.”

But Mr Taylor wrote: “For … Woodside, Santos and Beach, our forecasts for average price achievement fall below the cap level and we think they will be largely unaffected by caps.

“Woodside’s average price achievement did shoot up in second-quarter 2022 to near the low end of the proposed cap,” he said. “But we’d see this … largely as a one-off and third-quarter prices had already fallen substantially.”