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Highlights
- Santos (ASX:STO) postpones major investment in the Dorado oil project in WA.
- Carnarvon Energy (ASX:CVN) shares tumble over 20% following the announcement.
- Timeline for Dorado construction approval in 2025 is now unattainable.
Santos Limited (ASX:STO) has opted to delay its significant $2 billion-plus oil and gas project, Dorado, in Western Australia, a decision that has sparked a sharp decline in its minority partner’s stock price. Carnarvon Energy Limited (ASX:CVN), which holds a 10% stake in the venture, saw its shares plummet by as much as 27% following the news. By midday, Carnarvon's shares had decreased by 22.6%, trading at 12 cents, while Santos shares dipped 1.9%, trading at $7.155.
Santos announced that it would not proceed with purchasing an oil production vessel for Dorado and decided to hold back on starting engineering and design work for the project. These delays make it impossible to meet the initial target for a 2025 final investment decision, effectively pushing back the project's anticipated timeline.
Carnarvon's CEO, Philip Huizenga, expressed disappointment over Santos’ decision. He stated that this deferral is a setback for the venture and the efforts invested in progressing toward project approval.
The Dorado project is considered one of the most significant oil developments in Australia in recent years, located in the Bedout Sub-basin off the northwest coast. It has been valued at over $2 billion and has the potential to deliver substantial returns once operational. The latest delay, however, raises questions about project funding, market conditions, and its overall future timeline.
Market reactions have highlighted the disparity in impact on the two companies involved. While Carnarvon faced a dramatic fall in stock value, Santos, which owns the majority stake in the project, experienced a much smaller decline.
For stakeholders and industry observers, this development underscores the challenges oil and gas ventures face amid shifting market dynamics and capital allocation strategies. Despite the temporary halt, both companies remain invested in navigating the project toward eventual completion, signaling the importance of Dorado as a long-term opportunity.
Investors and industry followers will now await updates from Santos and Carnarvon regarding revised timelines and strategies for the project as market conditions evolve.
