Woodside Energy vs. Santos: Which ASX Energy Stock is Better Positioned for a Geopolitical-Driven Oil Price Rally?

The global energy sector is no stranger to volatility, but the current geopolitical landscape—marked by U.S.-Iran tensions, OPEC+ uncertainty, and supply shocks—has created a unique environment for energy stocks. Two Australian energy giants, Woodside Energy (WDS) and Santos (STO), are navigating these dynamics with contrasting strategies. This analysis evaluates which company is better positioned to capitalize on a geopolitical-driven oil price rally by assessing fundamental strength, technical momentum, and broker consensus in a high-risk, high-reward environment.

Fundamental Strength: Stability vs. Flexibility

Woodside Energy has emerged as a paragon of financial discipline. With a P/E ratio of 20.2 (as of June 2025), it reflects a balance between growth and earnings resilience. The company's $8.4 billion liquidity—bolstered by a $3.5 billion bond issuance and a $1.9 billion payment from Stonepeak—provides a robust buffer against market shocks. Its 7.9% dividend yield further cements its appeal as a defensive play in a low-yield environment.

Woodside's production guidance of 186–196 MMboe in FY 2025, supported by low unit costs ($8.50–$9.20/boe), positions it to benefit from rising oil prices. Its Scarborough LNG project (86% complete) and Louisiana LNG (22% complete) are long-term growth drivers, with expected contributions from 2026 onward. These projects are insulated from geopolitical volatility due to their focus on gas, a commodity less tied to Middle Eastern supply chains.

Santos, meanwhile, has adopted a more flexible approach. While its first-half 2025 profit dropped 66% to $654 million, the company's strategic openness to asset sales or a $16.3 billion takeover signals adaptability. Its Cooper Basin and PNG LNG assets generate steady cash flows, aligning with Asia's growing demand for cleaner energy. However, Santos' debt-to-equity profile remains opaque, and its 4.8% dividend yield lags behind Woodside's, making it a riskier proposition for income-focused investors.

Verdict: Woodside's disciplined balance sheet and long-term LNG projects offer greater stability, while Santos' flexibility provides upside in a rapidly shifting market.

Technical Momentum: Strong Buy Signals Amid Volatility

The technical landscape for both stocks is shaped by the recent oil price surge, driven by U.S.-Iran tensions and OPEC+ uncertainty.

Woodside Energy is in a "Strong Buy" zone, with its 14-day RSI at 68.6, nearing overbought territory. The stock's 5-day, 20-day, and 50-day moving averages are all in bullish alignment, suggesting short- to medium-term gains. The Fibonacci pivot point at $24.72 acts as a key resistance level, and a breakout here could signal a new upward trend.

Santos has experienced a 12.4% surge following a takeover bid from an Abu Dhabi-backed consortium. Its 4-hour chart shows an ascending triangle pattern, with $8.40 as a critical resistance level. The RSI on the 2-week chart confirms a breakout, and Elliott Wave analysts predict a potential move to $9.00 if key support levels hold.

While both stocks show bullish momentum, Santos' short-term volatility (driven by takeover speculation) makes it a higher-risk trade.

Broker Consensus: Buy Ratings and Price Targets

Broker ratings reinforce the divergence between the two stocks. Morgans rates Woodside at "Add" with a $30.10 price target, implying an 8.2% upside from current levels. The broader consensus averages a $25.45 price target, reflecting confidence in its LNG growth and geopolitical insulation.

Santos has a strong "Buy" rating from most analysts, with an average price target of $7.47—a 11.5% discount to its current price of $8.82. However, this undervaluation may reflect lingering concerns about its debt and operational flexibility. Macquarie's "Outperform" rating highlights Santos' potential to benefit from a sustained oil price rally, but its reliance on M&A outcomes introduces uncertainty.

Geopolitical Exposure: A Double-Edged Sword

Both companies operate in stable regions (Australia and the U.S. for Woodside; Australia and PNG for Santos), mitigating risks from Middle Eastern conflicts. However, Santos' openness to takeovers and asset divestments suggests a more reactive stance to geopolitical and regulatory shifts. Woodside's ESG-aligned projects (e.g., emissions reduction targets) further insulate it from regulatory risks, aligning with global decarbonization trends.

Investment Thesis: Balancing Risk and Reward

In a geopolitical-driven oil rally, Woodside Energy emerges as the more compelling long-term play. Its strong fundamentals, disciplined capital allocation, and low geopolitical exposure make it a resilient choice for investors seeking stability. The Scarborough and Louisiana LNG projects offer compounding growth over the next five years, while its 7.9% yield provides income security.

Santos, on the other hand, is better suited for high-risk, high-reward investors. Its takeover speculation and short-term technical momentum could drive sharp gains, but its profit volatility and debt concerns require closer monitoring. A pullback to $6.40 could present a tactical entry point for aggressive traders.

Conclusion

The ASX energy sector is at a crossroads, with geopolitical tensions amplifying both risks and opportunities. Woodside Energy offers a balanced, defensive approach with robust fundamentals and long-term growth, making it ideal for capital preservation in a volatile environment. Santos appeals to speculative investors willing to bet on a potential takeover or asset restructuring.

For a geopolitical-driven rally, Woodside Energy is the more prudent choice. However, investors with a higher risk appetite and a short-term horizon may find value in Santos' momentum—provided they closely track its M&A and debt dynamics.