Santos Limited (ASX: STO)

Santos Limited is a Natural Gas Company that remains focussed in executing the strategic plan to transform, build and grow. Santos has a good foothold in both Australia and Asian markets. In the first quarter of 2018, the Company generated $246 million in free cash flow and reduced its net debt by $200 million to $2.5 billion. The Company is set to drill more wells in 2018 to establish a good growth trajectory. The significant reduction in net debt and a disciplined low-cost approach embedded in the business prove to be long-term catalysts.

Regulator approves an environmental plan for itsBeehive 3D Seismic Survey - Recently, Melbana Energy Limited (ASX: MAY) advised that it has received environmental approval from the regulator, NOPSEMA, to undertake the Beehive 3D Seismic Survey over the Beehive Prospect which is one of the largest undrilled hydrocarbon structures in Australia. The Beehive 3D survey contractor will be appointed imminently and the survey itself is expected to be commenced in July and completed before the end of August 2018.French major, Total and Santos (operator) have an option (exercisable together or individually) to acquire a direct 80 per cent participating interest in the permit in return for fully funding the costs of all activities until completion of the first well in the WA-488-P permit. This acquisition of a new 3D seismic survey over Beehive will provide the potential for further de-risking of the prospect and will facilitate consideration of a preferred location for the Beehive-1 exploration well. The Beehive prospect is potentially the largest undrilled hydrocarbon prospect in Australia. Beehive is currently defined by a tight grid of 2D seismic data. The Group was leased that got an environmental permit insufficient time which will help in the prompt acquisition of the Beehive 3D Seismic Survey.


Beehive Prospects (Source: Company Reports)

Its existing commercial arrangement with Total and Santos provided Melbana with the opportunity to explore this enormous prospect at no further cost to Melbana and which will be a game changer for the company, the region and its shareholders.

Meanwhile, Harbour Energy Australia Pty Limited ceased to be a substantial holder of STO since 26 May 2018. STO stock was up by 8.35 per cent in the past six months and declined by 5.42 per cent in the past five days with acquisition proposal rejection and oil price scenario. We give a “Hold” recommendation at the current market price of $ 5.67 (up 1.6% on May 30, 2018), giventhe run-up and future potential.

 
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