Australia Oil & Gas: Earnings cuts on lower prices but energy security thematic supports growth project delivery

Research evidence excerpt

Australia Oil & Gas: Earnings cuts on lower prices but energy security thematic supports growth project delivery

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18 Jun 2026 10:53:21 ET │ 32 pages

Australia Oil & Gas

Earnings cuts on lower prices but energy security thematic supports

growth project delivery

Tom Wallington AC

CITI'S TAKE +61-282-254-326

With an Iran MOU already signed and a return to largely normalised SoH tom.wallington@citi.com

flows by mid-to-late July, our updated base case sees the oil market shift Sumeet Ozarde

from a ~2mbpd surplus pre-conflict to a ~4mbpd surplus by 2027. This

drives material downgrades to our oil and gas price forecasts which sees sumeet.ozarde@citi.com

earnings and cash flow cuts across the sector. However, we become more

constructive on growth execution and energy security-driven project

development, increasing our risk weighting for Browse to 25% (from 10%)

and Papua LNG to 50% (from 25%). While we trim target prices, we retain

our ratings. We continue to see scope for STO to narrow its valuation

discount to WDS, supported by improving line of sight to its refreshed

capital management framework and a more cautious medium-term LNG

outlook with JKM expected to fall to < $10 in CY27 as European inventories

fill to capacity.

Citi's oil and gas price outlook reverts to bearish positioning — With oil re-tracing

to sub $80 and markets reverting close to pre-conflict forward curves, Citi’s Global

Commodity Team make sweeping cuts to our forecast for oil and gas seeing

increasingly looser fundamentals and prices well below forward strips (link and link).

Implied oil prices across our upstream coverage discount $60 for WDS, $55 for STO,

$69 for BPT, and $33 for KAR. With limited upside from our base case commodity