8 June 2021 Analysts Stuart Howe 613 9235 1856 Joseph House 613 9235 1624 Energy weekly Authorisation Hamish Murray 613 9235 1813 Oil prices rally on robust demand outlook Energy Producers and Developers Brent hits multi-year high on improved demand outlook Weekly Mkt Cap Ticker Price change (A$m) (%) Oil price benchmarks have risen to 2 year highs, with Brent clearing US$70/bbl last WPL $24.01/sh 23,136 10% week for a weekly gain of 3% to now US$71/bbl. Saudi Arabia’s Energy Minister STO $7.70/sh 16,040 14% provided upbeat comments, stating that the demand outlook for oil “has shown clear OSH $4.13/sh 8,582 13% signs of improvement.” An International Energy Agency (IEA) report warned of a ORG $4.77/sh 8,401 20% supply gap in the second half of 2021 as stagnant supply falls short of rising global BPT $1.38/sh 3,148 9% demand, which it expects will support oil prices. The IEA anticipates global oil demand KAR $1.39/sh 767 13% STX $0.36/sh 716 15% to be 5.4 million barrels per day higher in 2021 compared with the previous year. For SXY $3.48/sh 639 10% context, the US Energy Information Administration puts global 2020 oil consumption at COE $0.27/sh 440 -2% around 92 million barrels per day. Reopening of economies following COVID related CVN $0.26/sh 399 6% lockdowns support the IEA’s demand outlook. GLL $0.66/sh 193 -13% BYE $0.12/sh 120 15% In the US, gasoline demand hit its highest level since the beginning of the pandemic FAR $0.01/sh 110 0% according to Descartes Labs, a geospatial intelligence company. The Memorial Day BLU $0.08/sh 100 1% (31 May 2021) long weekend traditionally marks the start of the US driving season and CTP $0.13/sh 94 8% higher fuel demand. Elsewhere, the CEO of Lukoil PJSC stated that demand for ATS $0.05/sh 59 7% “gasoline has already reached the level of 2019 both in Europe and Russia. Domestic COI $0.06/sh 44 -15% flights in the U.S. have increased to almost the pre-pandemic level.” Bell Potter Securities energy sector coverage Global media see OPEC’s next meeting on 1 July 2021 as a likely opportunity to Target/ Ticker Rating Valuation* announce further unwinding of its curtailed supply position. OPEC+ is restoring two BLU* $0.16/sh Buy (Spec) million barrels per day of idled capacity in monthly instalments over May-July 2021. BPT $1.73/sh Buy Saudi Arabia, as OPEC+’s largest member, maintains a more conservative approach BYE $0.42/sh Buy to restoring capacity and would like to “see demand before you see supply,” while COE $0.45/sh Buy Russia has consistently advocated production increases. CEOs of Russian oil COI* $0.13/sh Buy (Spec) CTP $0.23/sh Buy companies voiced the need for ramping up supply from July 2021, as global oil FAR* $0.03/sh Buy (Spec) demand recovers. SXY $3.75/sh Buy Source: IRESS & BELL POTTER SECURITIES Separately, the media reported that Exxon Mobil’s minority activist investor, Engine * valuation for Speculative rated stocks No.1, has expanded its Board presence with a third Director voted in. Investors of the Speculative rated securities: - See risks on Page 25 company also approved a proposal requiring the company to disclose political and - May not be suitable for Retail clients. climate-lobbying activities, a level of disclosure which was strongly opposed by S&P/ASX Energy (index) incumbent directors. 140 120 100 Table 1 - Oil & gas prices & energy indices 80 Commodity/Index Last close price Weekly change (%) Monthly change (%) Yearly change (%) 60 Brent Crude - $US/bbl 71 3% 4% 78% 40 US Crude WTI - $US/bbl 70 5% 8% 82% 20 Asia Tapis Crude - $US/bbl 72 4% 4% 98% 0 Henry Hub Gas - US$/MMbtu 2.97 5% 2% 77% Jun 19 Dec 19 Jun 20 Dec 20 Jun 21 JKM LNG - US$/MMbtu 10.61 2% 17% 412% XEJ S&P 300 Rebased ASX 200 Energy Index 8,536 10% 7% 6% S&P 500 Energy Index 416 7% 5% 18% MSCI World Energy Index 172 6% 4% 17% SOURCE: BLOOMBERG - EUCRBRDT INDEX (BRENT), USCRWTIC COMDTY (WTI), APCRTAPI INDEX (TAPIS), NGUSHHUB INDEX (HENRY SOURCE: IRESS GAS), JKL1 COMDTY (JKM), AS51ENGY INDEX (ASX 200 ENERGY), S5ENRS INDEX (S&P 500 ENERGY) & MXWO0EN INDEX (MSCI WORLD ENERGY) BELL POTTER SECURITIES LIMITED DISCLAIMER: THIS REPORT MUST BE READ WITH THE DISCLAIMER ON PAGE 26 THAT FORMS Page 1 ABN 25 006 390 772 PART OF IT. AFSL 243480 Energy weekly 8 June 2021 Commodity and index performance Figure 1 - Energy commodity complex (index) Figure 2 - Crude oil: Brent, WTI & Tapis Index US$/bbl 450 100 400 80 350 60 300 40 250 200 20 150 0 100 -20 50 -40 0 2016 2017 2018 2019 2020 2021 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Brent crude Henry Hub gas Brent Crude US Crude WTI Asia Tapis Crude Newcastle thermal coal LNG Japan/Korea Market SOURCE: BLOOMBERG - COASNE60 INDEX (THERMAL), JKL1 COMDTY (JKM), EUCRBRDT INDEX (BRENT) SOURCE: BLOOMBERG - EUCRBRDT INDEX (BRENT), USCRWTIC COMDTY (WTI) & APCRTAPI INDEX & NGUSHHUB INDEX (HENRY GAS) (TAPIS) Figure 3 - Thermal coal (FOB Newcastle) Figure 4 - JKM (Japan Korea Marker) LNG futures price US$/t US$/MMbtu 140 20 18 120 16 100 14 80 12 10 60 8 40 6 4 20 2 0 0 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 SOURCE: BLOOMBERG - COASNE60 INDEX SOURCE: BLOOMBERG - JKL1 COMDTY Figure 5 - Equity indices: ASX Energy, US Energy & MSCI World Figure 6 - ACCC netback, JKM & US gas Index $ 26 160 24 22 140 20 18 120 16 100 14 12 80 10 8 60 6 4 40 2 0 20 2016 2017 2018 2019 2020 2021 2022 2023 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 ASX 200 Energy Index S&P 500 Energy Index Henry Hub - US$/MMbtu Henry Hub - A$/GJ ACCC net back price - A$/GJ LNG Japan/Korea Marker - A$/GJ MSCI World Index Forward net back price - A$/GJ SOURCE: BLOOMBERG - AS51ENGY INDEX (ASX 200 ENERGY), S5ENRS INDEX (S&P 500 ENERGY) & SOURCE: ACCC, BLOOMBERG - JKL1 COMDTY (JKM) & NGUSHHUB INDEX (HENRY GAS) MXWO0EN INDEX (MSCI WORLD ENERGY) Page 2 Energy weekly 8 June 2021 Table 2 - Price Performance - Oil & gas, indices and currency Prices Price Performance T - 3 T - 6 Weekly Monthly Quarterly 6 month Yearly 2 Year 5 Year Commodity Units Last Close T- 1 Week T - 1 Month Months Months T - 1 Year T - 2 Years T- 5 Years change change change change change change change Oil Brent Crude US$/bbl 71 69 68 68 48 40 63 49 3% 4% 5% 47% 78% 12% 45% US Crude WTI US$/bbl 70 66 65 65 46 38 53 50 5% 8% 7% 53% 82% 32% 40% Asia Tapis Crude US$/bbl 72 70 70 71 48 36 67 51 4% 4% 2% 52% 98% 9% 42% Mars US US$/bbl 69 66 65 65 47 39 58 46 5% 7% 6% 49% 76% 20% 50% OPEC Crude Oil Basket US$/bbl 70 69 67 68 48 39 61 46 2% 4% 3% 47% 81% 15% 52% Gas Henry Hub Natural Gas US$/MMbtu 2.97 2.84 2.90 2.54 2.36 1.68 2.40 2.32 5% 2% 17% 26% 77% 24% 28% JKM LNG Price US$/MMbtu 10.61 10.40 9.06 6.00 7.70 2.07 4.48 4.77 2% 17% 77% 38% 412% 137% 122% Indices ASX 200 Energy Index 8,536 7,742 7,964 8,632 8,323 8,054 10,487 8,204 10% 7% -1% 3% 6% -19% 4% S&P 500 Energy Index 416 390 397 397 300 351 448 504 7% 5% 5% 39% 18% -7% -18% MSCI World Energy Index 172 163 165 165 135 148 194 199 6% 4% 5% 28% 17% -11% -14% ASX 200 Index 7,282 7,162 7,062 6,740 6,688 5,999 6,383 5,360 2% 3% 8% 9% 21% 14% 36% S&P 500 Index 4,230 4,204 4,202 3,821 3,702 3,232 2,843 2,109 1% 1% 11% 14% 31% 49% 101% MSCI World Index 2,997 2,976 2,952 2,723 2,642 2,288 2,104 1,686 1% 2% 10% 13% 31% 42% 78% Currency Spot USD/AUD 0.77 0.77 0.78 0.77 0.74 0.70 0.70 0.74 0% 0% 1% 5% 10% 11% 5% SOURCE: BLOOMBERG Page 3 Energy weekly 8 June 2021 Energy comps tables Table 3 - Balance sheet structures Market cap Cash Debt Net debt EV Company name (ticker) AUD$m AUD$m AUD$m AUD$m AUD$m Woodside Petroleum (WPL.AU) 23,136 4,653 8,023 3,370 26,505 Santos (STO.AU) 16,040 1,703 5,864 4,161 20,201 Origin Energy (ORG.AU) 8,401 474 4,757 4,283 12,684 Oil Search (OSH.AU) 8,582 698 3,766 3,068 11,649 Beach Energy (BPT.AU) 3,148 114 158 44 3,192 Senex Energy (SXY.AU) 639 58 103 45 684 Cooper Energy (COE.AU) 440 115 229 114 555 SOURCE: BLOOMBERG & BELL POTTER SECURITIES ESTIMATES Table 4 - Balance sheet gearing Equity Net debt Company name (ticker) ND/ND+E AUD$m AUD$m Woodside Petroleum (WPL.AU) 16,624 3,370 17% Santos (STO.AU) 9,331 4,161 31% Origin Energy (ORG.AU) 11,830 4,283 27% Oil Search (OSH.AU) 7,192 3,068 30% Beach Energy (BPT.AU) 2,923 44 1% Senex Energy (SXY.AU) 309 45 13% Cooper Energy (COE.AU) 331 114 26% SOURCE: BLOOMBERG & BELL POTTER SECURITIES ESTIMATES Table 5 - Net debt & interest coverage ratios EBITDA Net debt Net debt/ Net interest EBITDA/Net AUD$m (1) AUD$m EBITDA x AUD$m interest x Company name (ticker) 2021 2022 Dec-20 2021 2022 (2) 2021 2022 Woodside Petroleum (WPL.AU) 4,895 4,954 3,370 0.7x 0.7x 311 15.7x 15.9x Santos (STO.AU) 3,274 3,523 4,161 1.3x 1.2x 300 10.9x 11.8x Origin Energy (ORG.AU) 2,161 2,353 4,283 2.0x 1.8x 238 9.1x 9.9x Oil Search (OSH.AU) 1,291 1,514 3,068 2.4x 2.0x 216 6.0x 7.0x Beach Energy (BPT.AU) 996 1,117 44 0.0x 0.0x 8 124.5x 139.6x Senex Energy (SXY.AU) 79 113 45 0.6x 0.4x 17 4.7x 6.8x Cooper Energy (COE.AU) 85 139 114 1.3x 0.8x 13 6.4x 10.4x SOURCE: BLOOMBERG EARNINGS ESTIMATES ADJUSTED BY BELL POTTER SECURITIES NOTES: (1) ADJUSTED FOR CALENDAR YEAR; (2) FY20 OR JUN 20 HY ANNUALISED Table 6 - Profitability ratios EBITDA margin % NPAT margin % Company name (ticker) 2021 2022 2021 2022 Woodside Petroleum (WPL.AU) 85% 85% 26% 28% Santos (STO.AU) 59% 62% 19% 20% Origin Energy (ORG.AU) 18% 20% 4% 5% Oil Search (OSH.AU) 70% 76% 21% 28% Beach Energy (BPT.AU) 65% 67% 24% 26% Senex Energy (SXY.AU) 55% 59% 22% 32% Cooper Energy (COE.AU) 48% 57% 3% 12% SOURCE: BLOOMBERG & BELL POTTER SECURITIES ESTIMATES NOTE: ADJUSTED FOR CALENDAR YEAR Page 4 Energy weekly 8 June 2021 Domestic peer comparison Table 7 - Peer comparison - EV/2P Reserves, EV/2P Reserves + 2C Contingent Resources, EV/Production Production Multiple Company Name EV Reserve & Resource (Mmboe) Multiples (A$/boe) rate* (A$/boe) A$m 2P 2C 2P + 2C EV/2P EV/2P+2C mmboe/p.a.