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Santos

By Dan Stratful

Monday 21st November 2011

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Santos (ASX: STO) faces an exciting future as it adds LNG production to its oil and gas portfolio, and its LNG strategy is spearheaded by the GLNG project in Queensland, which is progressing on schedule and on budget and due to produce its first LNG in 2015.

STO is one of Australia’s leading oil and gas producers, supplying Australian and Asian customers. In addition to its oil and gas reserves STO is pursuing a liquefied natural gas (LNG) strategy with interests in four exciting LNG projects including the cornerstone GLNG project in Queensland.

Whilst considered a lower quality proposition than its peer Woodside Petroleum, STO is considered a perennial takeover target due to its developing LNG projects. 

Other LNG projects STO has earmarked for development include its Papua New Guinea project, the Darwin project and the Bonaparte project in the Timor Sea.

In the first half of the current financial year STO reported production of 22.9 million barrels of oil equivalent (MMboe) which was 5% lower than the 2010 first half. Key factors impacting production in the first half were lower Western Australian gas production primarily due to adverse weather and additional maintenance, while STO also sold down its share of GLNG from 60% to 30%. First half revenue from ordinary activities increased 1% to $1.1 billion.

STO needs to fund its key LNG growth projects over the next few years, and it needs to strike a balance between funding growth and continuing to pay shareholders a dividend. STO anticipates a reduced dividend payment during its capital intensive growth phase between now and 2015.


Status: Growth buy

STO’s shares today traded at $12.82

For sharemarket and fixed income trading enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.


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