Jungle Drums Beating on WDS

Exxon and Chevron reported bumper cashflows and profits overnight on Wall Street .....and their share prices took off .....suggesting the market was taken by surprise (which given the way all the planets have been aligning for the oil and gas sector is a surprise in itself)

Exxon up 4.63% overnight
Chevron up 8.90% overnight

When I say the planets aligning :

- Markets generally have had a good July as fears of a high interest rates/inflation/global recession have receded a little ( ie good for oil and gas demand)

-Global awakening around energy security and the place of oil and gas for a good few decades yet (not to mention an equivalent global awakening around the shortcomings of renewables) The ESG crowd have lost their voice a little.

-The supply problem simply hasn’t changed. Oil prices over $100 and staying there would have previously resulted in a frenzy of new drilling/ new investment.....all part of the cycle.....but this just isn’t supported like it used to be. The ESG crowd still have enough of a say to stop this happening like it would’ve in the past. Supply is tight.

- The above has meant oil prices are being well supported above $100 and the longer they stay at these levels (it’s been quite a while now) the longer the market can easily envisage them staying elevated well into the future....instead of doing forward projections at $US60 they start thinking $US80

So what about WDS specifically ?

Well the Exxon/Chevron tailwinds equally apply.

.....but throw in a 10% dividend yield - absolutely unheard of in the US - sure to draw in US investors.

.....for us locals the relatively weak $A and franking makes it even more irresistible.

ESG is an interesting one locally - has always been more of a ‘problem’ here .....but there’s no doubt attitudes have shifted here too.

Fund managers have been in the financial press lately making some interesting statements .....they were completely shunning oil and gas investments 12 months ago .......now because energy security has become a ‘thing’ they’re.....

“adjusting their models”
and
“reviewing their policies”

Pathetic - they just blow with the wind - if there’s a dollar in it to be an ESG zealot - they’re there - if there’s a dollar to be back in fossil fuels they’ll find a way to be back there as well !

......and then there’s the big banks ....a couple of the them have gone from a complete blackban to ....”well if the nations energy security really becomes an issue here in Australia we can’t completely rule out lending in this space” LOL

Both federal and state governments have been subtly shifting their language on the whole fossil fuel debate too.

So the ESG ball and chain is certainly not as much of a drag as it was 8 or 9 months ago.

Apart from the above some of the big brokers are putting some positive news out there now re sp targets and bumper dividends and profits.....the market is doing the maths .....the jungle drums are beating.

At the start of the year a $30 sp for WDS was an aspirational target. Now we just take it for granted ....and now that it has consolidated and traded in the low $30’s for several months I really think it is poised for a Chevron style break out upon release of results .....the numbers just need to be good.

Good luck to all holders (and stay patient)