ExxonMobil (XOM) Sounds Alarm on Australia's Gas Supply Outlook
Exxon Mobil Corporation XOM has issued a serious warning regarding the future of Australia's domestic gas supply, emphasizing the urgent need for policy stability and increased investment in the sector, per a Reuters report.
The company forecasts a significant decline in gas availability, predicting that by 2030, the domestic gas supply to Australia's southern states could fall by 44%.
ExxonMobil, operating the Gippsland Basin joint venture, stresses the critical nature of timely investments to prevent this looming shortage.
The Gippsland Basin joint venture is the largest single gas supplier to the country's southern region, covering New South Wales, Victoria, Tasmania, the Australian Capital Territory and South Australia. Although the Gippsland Basin is considered pivotal in addressing the potential gap in gas supply, the necessary final investment decisions for its development are pending.
Highlighting the regulatory challenges, ExxonMobil contrasts the process of obtaining drilling permits in the United States with Australia, where the latter’s process takes up to two years, thus severely hindering the swift development required to meet future gas demands. The company points out that with one-third of the gas needed by consumers on the East Coast between 2025 and 2030 not currently in production, expedited regulatory procedures are essential for achieving lower domestic gas prices.
Senex Energy, another key player in the industry, echoed these concerns. Ian Davies, the company's Chief Executive, criticized Australia's lengthy environmental approval process, which takes nearly three years for new projects to get the green light. He warned that this slow process deters investment and urged the Labor government to ensure that the nation's resources industry remains competitive.
The Labor government has proposed reforms to the Environment Protection and Biodiversity Conservation Act (“EPBC”), intending to streamline the project assessment process and reduce bureaucratic delays. However, industry figures argue that the existing 1,009-day average approval time under the EPBC Act is already impeding significant investments, such as Senex's planned A$1 billion expansion of its Atlas project in Queensland's Surat Basin, which was halted due to a government-imposed price cap on gas sales aimed at alleviating high energy costs for households and businesses.
In conclusion, major gas producers like ExxonMobil and Senex Energy are calling for substantial changes in Australia’s regulatory framework to facilitate the timely development of gas infrastructure. Without these changes, they warn, Australia could face a stark reduction in domestic gas supply, affecting energy security and affordability for its residents and businesses.
Price Performance
ExxonMobil shares have outperformed the industry in the past three months. The stock has gained 14.8% compared with the industry’s 7.4% growth.
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Zacks Ranks & Stocks to Consider
ExxonMobil currently carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector may look at some better-ranked companies mentioned below. Each of these three companies presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Global Partners GLP is a leading operator of gasoline stations and convenience stores. Over the past 30 days, GLP has witnessed upward earnings estimate revisions for 2023 and 2024, respectively.
The Zacks Consensus Estimate for Global Partners’ 2024 and 2025 earnings per share (EPS) is pegged at $3.90 and $4.47, respectively. GLP currently has a Zacks Style Score of A for Value.
Murphy USA Inc. MUSA is a leading independent retailer of motor fuel and convenience merchandise in the United States.
The Zacks Consensus Estimate for MUSA’s 2024 and 2025 EPS is pegged at $25.58 and $25.36, respectively. The company has a Zacks Style Score of B for Value, Growth and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
Sunoco LP SUN is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow.
The Zacks Consensus Estimate for SUN’s 2024 and 2025 EPS is pegged at $4.96 and $4.40, respectively. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
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