The Santos Ltd (ASX: STO) share price was up 0.5% in early trade before giving back those gains, and then some. This ASX oil and gas stock, which is part of the S&P/ASX 200 Index, closed yesterday trading for $7.85. At the time of writing on late Thursday morning, shares are swapping hands for $7.845, down 0.06%. Still, that handily outperforms the 1.38% loss posted by the ASX 200 at this same time. This relative outperformance comes following the release of Santos' quarterly update for the three months ending 30 September (Q3 2023).
The positive elements of the quarterly update contributed to the Santos share price's initial boost. The company reported sales revenue of US$1.4 billion for the quarter, up from US$1.3 billion in the previous quarter. However, it is worth noting that this figure falls short of the US$2.2 billion in sales revenue achieved in Q3 2022, a period characterized by higher oil and gas prices.
The third-quarter production came in at 23.3 million barrels of oil equivalent (mmboe), showing an improvement over the previous quarter, largely due to increased crude oil production in Papua New Guinea (PNG). Additionally, the Bayu-Undan project continues to produce, and Santos anticipates at least one more LNG cargo from the site, followed by sales into the Australian domestic market until the end of its field life.
The company achieved free cash flow from operations of approximately US$470 million for the quarter, bringing the year-to-date free cash flow to US$1.6 billion. Santos emphasized that its strong balance sheet positions it well to deliver shareholder returns, sustain its existing business, invest in major projects, and progress its decarbonization plans.
Santos is also advancing in its decarbonization efforts, with the Moomba CCS (Carbon Capture and Storage) project being 75% complete and on track for startup in mid-2024. This project is set to be the only CCS project in Australia qualified to generate Australian Carbon Credit Units for CO2 injected and stored in Cooper Basin reservoirs. Field trials for Direct Air Capture at Moomba are expected to commence in the near future.
Looking ahead, Santos has maintained its 2023 production guidance, which includes total production of 89 to 93 mmboe and sales volumes of 90 to 100 mmboe. On the capital expenditure front, the company expects to invest up to $1.6 billion in its major projects, including its Santos Energy Solutions segment.
While the Santos share price experienced fluctuations during the day, the company's positive results, continued production, and commitment to decarbonization initiatives may contribute to its long-term success, with an overall gain of 10% in 2023.