Top oil and gas stocks to buy now in Australia

Analysts believe that these stocks could energise portfolios with some big returns.

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There are a number of oil and gas stocks to choose from on the Australian share market.

But which ones could be top options for investors right now? Let's look at two ASX oil and gas stocks that analysts rate as buys. They are as follows:

Santos Ltd (ASX: STO)

The first ASX oil and gas stock that could be a buy according to analysts is Santos.

It is a global energy company with operations across Australia, Papua New Guinea, Timor-Leste and the United States.

Analysts at Ord Minnett are bullish on the company due to its positive free cash flow (FCF) outlook. They explain:

An estimated FCF yield of 20% once Pikka and Barossa LNG start producing, and rigorous control of how that extra cash is spent, implies to us that Santos will have plenty of room to return excess capital to shareholders either via an increased payout ratio or share buybacks. In our view, the medium-term prospects for Santos offer a compelling investment opportunity.

Ord Minnett currently has a buy rating and $8.50 price target on its shares. Based on the current Santos share price of $6.74, this suggests that upside of 26% is possible for investors over the next 12 months. A dividend yield of ~6% is also expected in FY 2025.

Woodside Energy Group Ltd (ASX: WDS)

Another ASX oil and gas stock that could be a buy in December according to analysts is Woodside.

That's the view of analysts at Morgans, which think that Australia's largest energy producer could be undervalued at current levels. Particularly given its positive growth profile, strong balance sheet, and high margins. The broker said:

The tide is certainly out in terms of investor sentiment on WDS. Despite Brent oil trading in line with our long-term forecast, WDS' share price implies a near cycle-low oil price level. We do not see this as capable of being explained by WDS' growth profile (comfortably funded) or risks around non-core assets such as Browse.

While the share price performance has been disappointing, supported by a strong balance sheet and high margins, we see WDS investors as capable of being patient. Investment view: We maintain an ADD recommendation believing WDS offers attractive long-term value.

Morgans has an add rating and $33.00 price target on Woodside's shares. Based on its latest share price of $24.86, this implies potential upside of approximately 33% for investors over the next 12 months. In addition, a dividend yield of 6.1% is expected in FY 2025.

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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