The fund manager Wilson Asset Management (WAM) has recently identified some S&P/ASX 200 Index (ASX: XJO) energy shares that it owns (or owned) in one of its main portfolios.
WAM operates several listed investment companies (LICs). Two of these LICs are WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).
There's also one called WAM Leaders Ltd (ASX: WLE) that looks at the larger businesses on the ASX, often referred to as ASX blue-chip shares.
WAM says WAM Leaders actively invests in the highest quality Australian companies. But does WAM have a good reputation for picking stocks?
The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 15.6% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index average return of 9.2%.
These are the ASX 200 energy shares that WAM outlines in its recent monthly update.
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Woodside Energy Group Ltd (ASX: WDS)
WAM Leaders noted there has been a significant merger between Woodside Energy and the oil and gas business of BHP Group Ltd (ASX: BHP).
This transaction, which was an all-share deal, almost doubled the market capitalisation and earnings of Woodside Energy Group.
The fund manager outlined a number of key benefits from the combination of these two businesses. It said positives include greater scale as well geographic and product diversity.
WAM also pointed out that the ASX 200 energy share's balance sheet is now 'de-geared'. This means it has a smaller amount of debt (compared to the size of the business). This, in turn, gives Woodside the potential for capital management and an acceleration of deep water projects such as Trion in the Gulf of Mexico. The company is expected to reach a final investment decision in the second half of this year.
The fund manager noted it's expecting Woodside's pre-tax synergies to total more than US$400 million per annum as the two businesses are integrated.
Santos Ltd (ASX: STO)
While WAM is positive on Woodside Energy, it's actually Santos which is the preferred oil exposure in the WAM Leaders portfolio.
The investment team noted that the leadership of the ASX 200 energy share is continuing to actively manage its portfolio. Santos is looking to sell down between US$2 billion to US$3 billion of assets in the 2022 calendar year. The purpose of the sale(s), according to WAM, is de-risking growth projects, strengthening the balance sheet, and "smoothening out" the allocation of capital expenditure.
The fund manager expects that the oil price will remain elevated over the medium-term due to "continued growing demand, underinvestment in capital and an escalated security of supply dynamic in response to the Russia-Ukraine war".
