Earning Bells Ringing for Santos And Cooper Energy

Summary

• The June 2020 earnings season is finally kicking in with the exchange now flooded with quarterly performance announcements from several listed companies.
• While the ongoing global turmoil has posed strong headwinds for some companies, some have clearly weathered the storm, and the June 2020 quarter seems to be a mixed bag so far.
• However, the market seems to be having the back of companies with the major equity index climbing nearly 40 per cent during the June 2020 quarter.
• Quarterly updates of Santos Limited (ASX:STO) and Cooper Energy Limited (ASX:COE)

The June 2020 quarter earnings results are flooding in on the exchange, and the market seems to have gained momentum with the S&P/ASX 200 index taking a U-turn in late March 2020 from the level of 4,402.50 (intraday low on 23 March 2020) to the present high of 6,160.60 (intraday high on 21 July 2020) to mark a recovery of ~ 39.93 per cent.

The June 2020 earnings season along with the diminishing market volatility or the market fear concerning the COVID-19 outbreak provided a cushion to the equity market.

Mining companies are one the largest contributor to the domestic economy, and while some of them have disclosed healthy performance for the June 2020 quarter, especially gold and iron ore miners, many now are now disclosing the June 2020 quarterly results with some even completing their financial year 2020, which in general, should now help to gauge the future direction of the equity market.

Earning Bells Ringing for Santos Limited and Cooper Energy

Santos Limited (ASX:STO)

After announcing a non-cash impairment of USD 700 to 800 million for the half-year ended 30 June 2020, the Company has now disclosed the quarterly performance, reflecting on strong production and sales growth.

Also Read: Low Oil Prices Take Toll; Oil Search Reports 30 per cent fall in Revenue While STO Declares Non-Cash Impairment

• STO witnessed a strong quarter with the production surging by 15 per cent against the previous quarter at 20.6 million barrels of oil equivalent.
• The overall YTD production (as on 30 June) climbed by 4 per cent against the previous corresponding period (or pcp) to reach 46.9 million barrels of oil equivalent.
• On the sales counter, STO managed to lock-in 10 per cent higher sales against the previous quarter at 24.6 million barrels of oil equivalent.
• The YTD sales (as on 30 June) climbed by 4 per cent against pcp to stand at 46.9 million barrels of oil equivalent.

However, despite a strong production and sales growth, the quarterly revenue of the Company took an 11 per cent hit against the previous quarter coming in at USD 785 million over lower average realised sales price.

• The Company YTD sales revenue plunged by 34 per cent against pcp at USD 1,668.
• STO average realised price took a hit of 52 per cent against the previous quarter to stand at USD 30.78 per barrel.
• The average realised price on a YTD basis fell by 34 per cent against pcp to stand at USD 47.83 per barrel.

Comparative Performance Snippet (Source: Company’s Report)

Furthermore, STO reduced its future production guidance by 2.46 to 1.13 per cent from the previous lower and upper range, and the new guidance is at 83 to 88 million barrels of oil equivalent.

• Likewise, the Company has now reduced the sales guidance by 1.83 per cent from the previous upper range of 109 million barrels of oil equivalent.
• The new sales guidance is at 101 to 107 million barrels of oil equivalent.

The stock of the Company last traded at $5.650 (as on 23 July 2020 closing), up by 3.48 per cent against its previous close on the exchange.

Cooper Energy Limited (ASX:COE)

COE recently announced its plan to invest $55 million in the Minerva Gas Plant, conjointly held with Mitsui Group, to capture the south-east gas market, and after a timely decision to invest and expand the gas capacity to take advantage of the supply crunch on the domestic front; the Company is out with another surprise for shareholders.

To Know More, Do Read: Cooper Energy Eyeing South-East Gas Market; To Invest $55 Million in Minerva Gas Plant

• COE has witnessed a bumper quarter with a 61 per cent increase in the quarterly revenue against the previous quarter.
• The June 2020 production surged by 118 per cent against the previous quarter to stand at 0.61 million barrels of oil equivalent.
• Likewise, the FY2020 production rose by 19 per cent against the previous financial year to stand at 1.56 million barrels of oil equivalent.
• Apart from a surge in production, COE also witnessed a spark in revenues with a quarterly increase of 61 per cent and a yearly increase of 3 per cent at $24.1 million and $78.1 million, respectively.

Furthermore, from the first look, it could be seen that the Company reduced its cash capital expenditure by 55 per cent on a yearly basis at $207.6 million.

• However, on a quarterly basis, the cash capital expenditure soared by 312 per cent to stand at 35.0 million.

Key Performance Measures Snippet (Source: Company’s Report)

COE last traded at $0.415 (as on 23 July 2020 closing), up by 1.22 per cent against its previous close on ASX.

In a nutshell, while the above-presented results are from just the latest release, many more resource companies have released their performance, which till now seems to be a mixed bag, with some such as Cooper Energy, various iron ore and gold miners such as Mount Gibson Limited (ASX:MGX), Fortescue Metals Group Limited (ASX:FMG), Saracen Mineral Holdings Limited (ASX:SAR), standing tall against the market turmoil, and some such as Santos, Oil Search Limited (ASX:OSH), are facing headwinds.

However, despite a mixed bag quarterly performance, the market seems to be having the back of companies, with S&P/ASX 200 index posting a strong gain of ~ 39.93 per cent in the June 2020 quarter.