(Bloomberg) -- Australia’s flailing energy stocks may reverse course next year as several stalled projects start production, according to analysts.
A sub-gauge of energy shares has fallen 18% in 2024 to become the worst-performing sector on the nation’s benchmark S&P/ASX 200 Index and lags behind regional peers. While slower project timelines and softer oil prices dragged on stocks, new infrastructure from companies like Santos Ltd. and Beach Energy Ltd. may provide a boost. Analysts project the energy index will rise 22% in the next 12 months, according to data compiled by Bloomberg.
“2025 is a key year for execution yet again as many of the companies are bringing projects to conclusion,” said Barrenjoey Markets Pty analyst Dale Koenders. It may also offer “a change in the investment landscape to focus more on returns toward shareholders.”
Santos aims to ship gas from its Barossa project starting the third quarter of 2025 after pushing back its target date. The Waitsia plant, a venture between Beach and operator Mitsui & Co., should also begin output next year after delays.
Santos also introduced a new capital framework in November that prioritizes shareholder returns over growth after struggling to increase its valuation.
The stock “is differentiated from its peers and remains our preferred Australian energy exposure,” partly due an “inflection point” in production and free cash flow from 2026, UBS Group AG analysts Tom Allen and Maike Baumeister wrote in a note dated Nov. 20.
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Meanwhile, the country’s biggest liquefied natural gas producer Woodside Energy Group Ltd. has pursued an aggressive growth strategy through acquisitions, with some secured projects due to hit milestones next year. Its Texas-based clean ammonia project is eyeing initial production from 2025, and its Louisiana LNG development is looking to reach a final investment decision in the first quarter. The stock, down 19% in 2024, makes up almost half of Australia’s energy sub-index.
In addition to project launches, US President-elect Donald Trump’s vow to impose additional tariffs on China, Mexico and Canada may benefit gas producers from regions like Australia, according to Koenders.
“The changing regulatory environment may actually slow down the next wave of LNG exports out of the US,” he said. That makes the outlook for LNG projects more expensive and suggests a higher commodity price longer term, which will be positive for Woodside and Santos, he added.