Key Points: 

  • The energy sector saw an earnings season of records and earnings meeting or exceeding expectations. But it was a tale of two halves.
  • Second half earnings were lower than first half earnings for energy companies.
  • Energy refiner profits were driven by very strong regional refining margins, but Taylor says those won't be repeating again
  • Mining services companies recorded mixed to disappointing results, with earnings largely missing expectations.

Transcript:

Mark Taylor: Well, there were two very different tales told for the two key sectors that I cover. So, the energy sector was an earnings season of records and earnings meeting or exceeding expectations, while on the mining services front, it was largely mixed to disappointing, with earnings by and large missing our expectations.

Just kicking off with the energy sector, Woodside reported record earnings, up 222% and reported a record dividend of US$1.44. That was slightly ahead of our expectations. Santos reported 160% increase in earnings, close to our expectations.

But on the energy and production front, it was a tale of two halves.

Second half earnings were lower than first half earnings and that was highlighted with Beach Energy, who reports the fiscal year and its first half fiscal 2023 earnings were down 18%. So, we've probably seen the best that the E&P companies are going to do, and earnings and dividends will come off from now.

On the refining side, Ampol reported record earnings and reported a special dividend, which was a bit of a surprise to the upside. Viva Energy, very strong earnings as well, probably in line to slightly below our expectations, if anything. That was driven on very strong regional refining margins. Those won't be repeating again. So, as with the production companies, they're fine as you can expect earnings to be lower from the record levels that they've reported.

On the mining services front, it was mixed to disappointing. The exception to that was Ventia Services whose earnings were very strong, dividends strong, in line with expectations. Disappointing was Downer, who reported a 30%-plus decline in earnings, having trouble with its utilities, maintenance contract and earnings downgraded there. Monadelphous earnings decline and guidance downgraded. So, with the mining services sector by and large mixed to disappointing and not as favorable as the energy sector.