Top Energy Stocks on ASX [2023]

Key highlights:

• The top energy stocks on the ASX are led by natural gas companies in 2023
• Energy stock returns have slowed in recent months compared to its outperformance in 2022
• Government intervention and policies could modify future performances

Top energy stocks on ASX

Trading volumes can provide signals for buying and selling opportunities in technical analysis. Greater overall trading levels for stocks tend to come with a large cap. Some energy shares have various business segments, whilst others are single product operations. Many renewables are part of diversified groups or have been taken private by investors in Australia.

Data as of 22/05/2023.

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Whether these ASX stocks can maintain past performance remains to be seen. The Australian government has proposed to cap coal and gas prices for at least one year to shield consumers from rising costs. This move could delay future investment decisions and play a role in limiting medium-term supplies. Keeping the energy sector running smoothly over the transition period to renewables is an ongoing challenge.

Discover the top energy stocks to watch

1. Santos Limited ($STO)

Market Capitalisation: $24.12b

Stock price (as of 22/05/23): $7.34

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 57% / 43%

Santos is a major oil and gas exploration and production company. It started operations in the Cooper Basin in the 1960s and has expanded with assets in Papua New Guinea, East Timor and the U.S.A. It's one of Australia’s biggest domestic gas suppliers and a leading liquified natural gas (LNG) supplier in the Asia Pacific region.

While there is ongoing demand for LNG, the firm is looking into other areas such as a carbon capture and storage project nears its Moomba gasfield to reduce its emissions profile. The team's also investigating a type of synthetic methane that could be blended with gas rather than pure hydrogen solutions. These ventures do have technical risks and their outcomes could affect the share price in the future.

2. Whitehaven Coal Limited ($WHC)

Market Capitalisation: $6.07b

Stock price (as of 22/05/23): $6.94

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 47% / 53%

Whitehaven operates and develops thermal and metallurgical coal mines throughout Queensland (QLD) and New South Wales (NSW). They benefited from increased demand due to sanctions on Russian coal and uncertainty around gas supplies in the northern hemisphere in 2022.

Whether these demand levels will hold up in 2023 remains to be seen. There are concerns about whether Whitehaven can meet future production targets due to operational challenges, labour shortages and weather interruptions. Their move to push start new coal projects has also attracted controversy.

WHC is on our list of the best dividend stocks on ASX, Whitehaven can be found along names like BHP, Rio Tinto and Telstra.

3. Origin Energy Limited ($ORG)

Market Capitalisation: $14.31b

Stock price (as of 22/05/23): $8.30

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 45% / 55%

Origin Energy is an integrated electricity generator, and electricity and natural gas retailer. The company has wind, solar and hydro projects in the pipeline, including the 60MW Yanco Solar Farm and the planned 90MW Carisbrook Solar Farm.

Origin's takeover bid from Brookfield and EIG partners to enable a quicker move towards net zero goals has not been finalised yet as of 21 May 2023. It will affect the firm's future and there are expectations that the businesses' structure will be altered. Despite these uncertainties, Origin has raised its earnings outlook for 2023 and benefitted from its stake in UK based energy retailer Octopus Energy.

4. Paladin Energy Ltd ($PDN)

Market Capitalisation: $1.95b

Stock price (as of 22/05/23): $0.66

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 51% / 49%

Paladin plans to restart the Langer Heinrich mine in Namibia on the back of increased uranium prices. The asset already has a 10 year track record and could produce over 76 million pounds of uranium in the future. There's potential for further resource generation from exploration assets in Australia and Canada.

With first production targeted for early 2024, profitability is some time away. Uranium stocks have performed relatively better in 2023 so far, compared to a lacklustre 2022. There are signs that the long-awaited nuclear industry renaissance could becoming closer to reality, although it's still no guaranteed event.

Paladin is featured in our list of top uranium stocks on the ASX.

5. Ampol Limited ($ALD)

Market Capitalisation: $7.39b

Stock price (as of 22/05/23): $31.00

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 63% / 37%

Ampol's main activities cover a range of key petroleum businesses, including the purchase, supply, refining, distribution and sale of products. They are the largest transport energy distributor and retailer in Australia with over 1,900 branded petrol stations.

The prolonged recovery from COVID-19 saw Ampol translate eventually high fuel prices into earnings growth and dividends in early 2023. Growth in infrastructure and jet fuel sales have been particularly significant. However, it is still under pressure to implement its sustainability strategy, which would involve cutting carbon emissions and increasing the number of EV charge points.

6. Genex Power Ltd ($GNX)

Market Capitalisation: $231.63m

Stock price (as of 22/05/23): $0.17

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 75% / 25%

Genex is developing a portfolio of renewable energy generation and storage projects in Australia. Their flagship asset is the Kidston Clean Energy Hub in north QLD an integrated project with large-scale solar generation, pumped hydropower storage and wind energy aspects.

They have additional battery and solar projects in QLD and NSW in the pipeline. It is one few ASX plays with purely renewable assets, with many others being part of companies with a mix of projects or in private firms. However, a takeover bide from Atlassian founder Scott Farquhar's Skip Capital and infrastructure investor Stonepeak Partners fell through in late 2022.

7. Woodside Energy Group Ltd ($WDS)

Market Capitalisation: $66.65b

Stock price (as of 22/05/23): $34.58

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 51% / 49%

Woodside Energy is significant independent player in the global oil and gas market. They have exploration, development and operation activities across several countries. A market cap of $65b makes it the largest amongst ASX energy stocks and was supported by a merger with BHP Group's oil and gas portfolio in June 2022.

They are an important local LNG player, with the product accounting for 48% of its product mix in FY22. Woodside expects its overall production to grow at over 4% CAGR from 2023 to 2027. The company has moved into the hydrogen market with its H2Perth operations producing the material from renewables and natural gas sources.

8. Strike Energy Limited ($STX)

Market Capitalisation: $1.20b

Stock price (as of 22/05/23): $0.48

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 57% / 43%

Strike Energy is focusing on commercialising its gas discovery in WA and building a fertiliser manufacturing segment for future value addition to the business. They have onshore positions north of Perth and are looking into a potential geothermal power project.

Strike could benefit from a potential gas shortage in Western Australia (WA), as demand for its use as a transition fuel could significantly increase by the end of the decade. Alternative energy generation sources need to be rapidly developed as the WA government has committed to closing state-owned coal plant by 2030.

9. Renascor Resources Limited ($RNU)

Market Capitalisation: $637.48m

Stock price (as of 22/05/23): $0.22

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 42% / 58%

Renascor Resources is developing a vertically integrated battery anode project in South Australia. The outputs from the world's second largest graphite deposit, named Siviour, will be processed into purified spherical graphite (PSG) to be used in lithium-ion batteries.

Renascor is working on plans for the Siviour Mine and hoping to increase the capacity of battery materials the processing plant could produce. They intend to use an eco-friendly purification process based on floatation, rather than using acids. There are concerns about potential delays and costs of the final project.

10. Boss Energy Ltd ($BOE)

Market Capitalisation: $966.07m

Stock price (as of 22/05/23): $2.74

Stake Platform Bought / Sold (1 Jan 2023 - 20 May 2023): 37% / 63%

Boss Energy is another uranium play with its fully permitted Honeymoon mine to produce up to 3.3 million pounds annually. It has $170m of established infrastructure, which includes a plant under care and maintenance when the mine closed in 2013.

The Honeymoon Project is fully funded and they expect to start production in Q4 2023. The location in South Australia is advantageous, it’s the only state with support from both sides of the government for producing uranium mines. Reaching production should benefit the stock, but movements in the uranium price could still affect its overall performance.

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How are energy stocks classified?

The popular Global Industry Classification Standard (GICS®) divides the energy sector into two parts. The first is oil, gas, coal and consumable fuels and the second is energy equipment and services. They can be further organised by business focus, which is usually related to their stage in the supply chain. Energy shares can also be grouped into non-renewable and renewable sources.

Although a wider range of businesses are commonly associated with the sector and are often informally included. Under GICs metals, mining and chemicals would fall under materials. Utilities also have their designation. This means strictly sticking to energy companies won't always cover investments such as lithium stocks and electricity providers.

Energy stocks FAQs

Are energy stocks risky investments?

The sector is known for its cyclical nature. Businesses are capital intensive and often face multi-year waits to complete projects. Attempting to time investment decisions to take advantage of the boom and bust is a risky venture. Some subgroups such as exploration firms generally come with higher uncertainty compared to producers.

Energy prices can be volatile and are greatly affected by factors outside the industry. Oil prices can change significantly over the medium term. They went from being negative during 2020 as demand collapsed due to the Covid-19 pandemic to record highs due to shortages by the end of 2021. Geopolitical events like the Russia-Ukraine conflict and organisations such as OPEC (Organisation of Petroleum Exporting Countries) have an outsized influence on the markets.

A slowdown in the economy also tends to reduce the demand for oil and energy in general. There are also safety and environmental concerns with the sector. As carbon emissions are increasingly penalised, some operators are likely to need to significantly adapt their business activities to avoid extra costs.

What has been the best performing energy stocks on ASX?

The details reveal differing performances amongst commodities and sub-sectors in the energy sector. Coal miners outperformed in 2022 due to increased global demand in 2022 from countries exiting Covid-19 restrictions and the fallout from Russia-Ukraine conflict. The energy sector has slowed in 2023, with some supply and demand shocks settling. Concerns about a recession has also damped the forward outlook for the energy sector.

In the year to date, Strike Energy has been a top performer with a 47.50% return in 2023. Oil and gas companies tended to have higher returns than coal businesses, signalling a shift from 2022. Other commodities like uranium has seen a more positive start to the year, although this has not translated to all firms in the industry. Progression at Boss Energy's project helped it towards a 29.95% return.

This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.