Ampol’s 1H26e trading update revealed an even stronger half of earnings than the market expected, albeit the earnings growth was centred on trading profits given oil price volatility. Ampol stated that EBIT would be near $1,350 million for 1H26e, a rise of $946 million. The key question is the sustainability of earnings. Refining margins may stay elevated while there is Middle East conflict but lower volatility oil market would result in lower earnings.

Ampol’s EG acquisition has been approved by the ACCC on condition of divesting 41 sites. Even with this, the EG deal is compelling. The EG stores enable a faster rollout of U-GO sites and cost savings in buying and overheads. We see value creation from this deal with further synergy upside. Ampol is positioned for a very strong year of earnings given higher refining margins in FY26e. However, the more enduring upside will come from the EG acquisition.

Ampol’s 1H25 earnings showed a small improvement in Convenience earnings, cost savings and a good exit run-rate for refining margins. We expect Ampol’s Convenience EBIT to rise in 2H25e despite another drop in fuel and tobacco volumes. The company’s 1H25 gearing was 2.8x, but gearing should reduce with lower capex and better margins over the next two years. The recently announced EG acquisition needs ACCC approval, which will be long-dated and there may be some contention around the number of sites to be divested given the geographic overlap.

Ampol has announced the proposed acquisition of the 500-store EG petrol station network. The acquisition price of $1,050 million is at an EV/EBIT of 24.8x pre synergies, or 9.1x post synergies (pre AASB-16), which highlights the importance of the synergies in this deal. Given Ampol’s existing supply to EG and ability to accelerate the rollout of U-Go un-manned stations, the synergies look plausible. We lift our target price from $28.50 to $30.00 to reflect the EG deal noting that it could be 5%-6% EPS accretive by FY29e. The key unknown is ACCC approval.