Investing in ASX energy shares

Energy shares have the potential to deliver capital appreciation and strong dividend flows, which makes them attractive to many investors.

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What are ASX energy stocks?

ASX energy shares are companies that generate and distribute the energy we rely on to power our devices. They include companies engaged in the exploration, production, and sale of oil, gas, electricity, and renewable energy projects. 

The energy sector is vital to the global economy, supplying the fuel that keeps businesses running. ASX energy companies are involved in activities such as 

  • Finding and producing oil and gas, used to generate electricity, manufacture fuels, and as raw materials used in the production of many hundreds of goods  
  • Generating and distributing electricity and natural gas to consumers (both retail and business) 
  • Contributing to the generation of renewable energy, whether through manufacturing components used in the production of renewable energy, or operating renewable energy facilities. 

The energy sector is changing as climate change becomes an increasingly pressing concern. Traditionally dominated by oil and gas companies, the sector is increasingly focused on renewable energy sources as the world transitions from using fossil fuels. 

Traditional energy companies are also embracing clean energy alternatives, transitioning as they recognise the investment potential of renewable energy sources for electricity generation.

Why invest in ASX energy shares?

The production and distribution of energy are crucial to providing the global economy with the power it needs to function. The energy sector and global economy are so closely intertwined that some economists use the values of oil and gas to gauge the economy’s health. 

Energy is essential – required for almost every human endeavour – and demand for it will only grow as the global population increases. The global energy industry generates vast amounts of revenue thanks to constantly rising demand.  

There are a large number of energy stocks listed on the ASX. These range from multibillion-dollar producers and distributors down to small-cap explorers. This means there is a broad range of potential investments to choose from. 

The energy market encompasses a diverse array of sectors that can allow investors to pursue different goals. There are blue-chip options, growth companies, income opportunities, and high-risk exploration and start-up companies.

Top energy stocks on the ASX

There are 140 ASX companies listed in the energy sector. Here are the top three based on market capitalisation from high to low.

Top ASX energy stocksCompany description
Woodside Energy Group Ltd

Petroleum explorer and producer, and a top 10 global independent

energy company 
Santos Ltd (ASX: STO)Australia’s largest natural gas supplier with a portfolio of LNG

and oil assets
Washington H. Soul Pattison and

Company Limited (ASX: SOL
Operates coal and oil mining and energy generation through

the New Hope Group 

Woodside Energy Group

Woodside Energy is an Australian petroleum exploration and production company. Established in June 2022 when Woodside and BHP Petroleum merged to create a global energy company, Woodside Energy is a top 10 global independent energy company by hydrocarbon production. 

The company has three pillars – oil, gas, and new energy. With more than 35 years of operations in Australia, Woodside Energy’s global portfolio includes assets in the Gulf of Mexico and Trinidad and Tobago. 

In the third quarter of 2022, Woodside reported record production, up 52% on the previous quarter. Sales volumes were up 59%, leading to a 70% uplift in revenue from the prior quarter. Production and revenue reflected the first full three months of contribution from the former BHP petroleum business. 

Strong operational performance across the combined portfolio has allowed the company to upgrade its full-year guidance. Long-term marketing deals signed during the quarter will strengthen the company’s trading position, with Woodside entering a sale and purchase agreement to supply LNG into Europe from 2023. 


Santos is a natural gas supplier. Already Australia’s biggest domestic gas supplier, Santos aims to be a leading Asia-Pacific LNG supplier. With a portfolio of LNG and oil assets, Santos has five core assets located in Australia and offshore. 

Locations include the Cooper Basin, where Santos operates Australia’s largest onshore oil and gas field development spanning South Australia and Queensland, as well as the Carnarvon Basin in Western Australia. In November 2022, Santos gave full-year production guidance of 103 — 106 million barrels of oil equivalent, with major capital expenditure of approximately $1.1 billion. Unit production costs in 2022 are expected to be at the lower end of the guidance range. 

Santos has embraced a new purpose and strategy based on decarbonisation and clean fuels. It intends to transition to a cleaner transition via Santos Energy Solution, which will provide clean fuels production, decarbonisation, and carbon management services. 

Washington H. Soul Pattison and Company Limited

Soul Patts is an investment house with a portfolio encompassing many industries, including telecommunications, mining, building products, property, and other equity investments. One of those investments is New Hope Corporation Limited (ASX: NHC) which has operations spanning coal mining, port operation,  exploration, oil, and agriculture. 

New Hope has two open-cut coal mines, each in Queensland and NSW. The company exports Tivoli brand coal, one of Australia’s cleanest burning coals. Its competitive advantage lies in its ability to manage each step in the coal chain, from exploration and mining to delivery via its port operations. 

New Hope recorded a net profit after tax (NPAT) of $983 million in FY22. Thermal coal prices continued to rise over the financial year, with average realised prices increasing more than 180%. The company held $715.7 million in cash and cash equivalents at the end of the financial year. 

Pros of investing in ASX energy shares

Vital service: ASX energy companies provide the electricity used to power homes and businesses and the fuels used to power transport. They play a vital role in the functioning of the economy. 

Growing demand: Energy consumption has increased exponentially since the 1950s and shows no sign of slowing down.1 Demand is growing across many countries as people get richer and populations increase. 

Commitment to reducing emissions. The commitment to reducing emissions has gained momentum, meaning there is a shift away from traditional power generation methods and a move towards electrification and renewables.  

And the disadvantages…  

Volatility: Geopolitical tensions can cause the oil price and the prices of gas and electricity to skyrocket. This means energy shares can be volatile, as we have seen over the past year.

Geopolitical risk: Geopolitical tensions can affect more than the price. They can result in entire projects being sidelined or halted where the territory is unstable. 

Profitability: Profitability in the energy sector is tied largely to the price of energy and inputs such as coal and oil. Nonetheless, the price of energy shares are typically relatively stable, and energy companies frequently pay dividends.

Are ASX energy stocks a good investment? 

The wide variety of Australian shares in the energy sector means there are options to suit most investors. Those interested in new technology and the transition to green energy may choose renewable energy stocks

For investors with a high-risk appetite, small-cap exploration companies may be attractive. Large-cap energy producers may fit the bill if you are after dividends. The energy stock that is right for you is the one that fits your investment strategy and financial situation. 

For those who want exposure to the sector as a whole, an exchange-traded fund (ETF) such as the Betashares Global Energy Companies ETF (ASX: FUEL) could be suitable. 

Energy companies have seen significant earnings growth in FY22 as higher prices result from a supply/demand imbalance. Whether the momentum can continue through FY23 is the crucial question, although sentiment towards the sector remains buoyant. 

Ultimately, whether ASX energy shares are right for you will depend on your investment goals, risk tolerance, and financial situation. 

Take the time to research the energy companies you are interested in to ensure they fit your financial objectives. Stay on top of market news and seek expert financial advice if required to make your investment decision.

Article Sources


1. Our World in Data, Energy Production and Consumption

This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

To the best of our knowledge, all information in this article is accurate as of time of posting. In our educational articles, a 'top share' is always defined by the largest market cap at the time of last update. On this page, neither the author nor The Motley Fool have chosen a 'top share' by personal opinion.

As always, remember that when investing, the value of your investment may rise or fall, and your capital is at risk.

Motley Fool contributor Katherine O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.