Santos Shares Fueled by Robust Financials and New Acquisition

  • Aug 27, 2018 AEST
  • Team Kalkine
Santos Shares Fueled by Robust Financials and New Acquisition

Santos is an oil and gas producer in the Asian pacific region, concerned with the exploration, development, production and sales of natural gas. Major products of the natural gas company are Liquid Petroleum gas, methane, ethane, coal seam gas, condensate and oil, shale gas and liquefied natural gas.

Five major assets of the company include: Cooper Basin, Papua New Guinea, Gladstone LNG, Western Australia and Northern Australia. Santos runs its operations in two major geographies – Asia and Australia. Recent surge in the share price came riding on string of positive news and half year result.

Update

Earlier, STO turned down a takeover bid amounting to $10.8 billion from Harbour Energy that did not resonate well with the Investors. However, the stakeholders did exhibit confidence after the company announced acquisition of Quadrant Energy for more than $2 billion. Talking about the synergies, the acquisition would provide Santos with greater ownership of the target. The high-quality portfolio would boost the offshore operating capacity of Santos. It would unlock the value for the shareholders in the long term and push the company to take the top spot in the domestic natural gas supplier space.

Santos earns majority of its revenue from the oil linked space and addition of Quadrant to the portfolio wound ensure the consistent cash flows as well as higher revenue for the company going ahead.

The acquisition of Quadrant is in line with the Santos long term vision and to expand their infrastructure. The acquisition would help the company in cranking up its annual production by 32% whereas the reserves would be up by 26%.

On the financials performance front, the company has reported underlying profit of $217 million which is almost double of the previous year. As opposed to the last year, the company has also revived the dividends at 3.5 cents per share. The performance of the Santos can be marked with remarkable sighting the losses they suffered in the wake of earthquake. Santos is on the path of achieving its debt reduction target a year ahead of the schedule.

Santos report -

Source: Company Report

Cooper basin has witnessed revival in the production with oil production reported highest in four years whereas costs per barrel came down by 13%. Santos managed to complete the Scotia CF1 project in Queensland earlier than the year in which it was scheduled for. Further, Roma East development is in line with its schedule.

On the liquidity front, Santos is performing good with $3.5 billion in cash and undrawn bilateral facilities. Further, the company is expecting proceeds from the sale of Asian assets by the second half of 2018 which justifies the dividend.

Stock Price Update

The stock has gapped up this month clocking the level of $7, the same offered by Harbour during the takeover bid.  After gap down in the month of May, the stock has been rising gradually, making higher highs and higher lows and respecting the upward trendline as support. After forming a HAMMER pattern on the chart last week, the stock confirmed that the pullback is just around the corner.

Santos report 1.png

Source: Investing.com

Going ahead, as the price cools down, level of 6.68 followed by 6.45 should be watched out for. Resistance is pegged around 7 followed by 7.12

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