Santos Limited

Santos facilities impacted by earthquake: Santos Limited (ASX: STO) is an Australia based company that offers energy needs to home and businesses throughout Australia and Asia. Recently, the company announced that gas production at the PNG LNG facilities (Hides Plant etc.) has been shut down as a precautionary measure following a major earthquake and a series of aftershocks in the Southern highlands and Hela Provinces. Further, the company has been advised by the PNG LNG operator that following the earthquake during the week of 26 February 2018, major assessments of damage to PNG LNG facilities revealed that it will take about 8 weeks to repair and restore the production. Santos has 13.5% interest in PNG LNG which is one of the fifth core long life natural gas assets of the company. Additionally, Santos has committed to donate US$200,000 to aid agencies to provide assistance to isolated communities who urgently need food, water and medical supports.

On the other hand, for the Mahalo Gas Project by Comet Ridge Limited with 40% interest in joint venture with Santos QNT Pty Ltd (Santos) and Australia Pacific LNG Pty Ltd (APLNG), recent reserves upgrade has been reported at the back of great support and co-operation from Santos and APLNG during the 2017 work programme.

For Queensland Oil Cooper Basin JV wherein Santos is the operator with 55% interests, four-well oil campaign in the Cocinero Field in southwest Queensland has continued under which Cocinero-7 and -8 have been targeting the Birkhead Formation as a primary objective and Murta Formation as a secondary objective. For South Australian Gas under Cooper Basin JV wherein Santos is the operator with 66.6% interest, a five-well gas and oil development campaign has continued in the Tirrawarra-Gooranie Field with primary objective of targeting gas and associated condensate in the Patchawarra Formation and oil production from the Basal Patchawarra / Tirrawarra Sandstone.
 

Net Debt Movement (Source: Company Reports)
 
Meanwhile, the company significantly reduced its loss in FY17 as the group has removed substantial costs, reported a material increase in underlying profit (433% YoY), generated significant free cash flow and reduced net debt to 2.7 bn during the same period. However, in an attempt to manage the debt, the group did not pay any final dividend. Its core assets have performed well and resulted in sales volumes above the upper end of the guidance and production towards the top end of guidance. STO stock price rose by 29.7% in the past six months as on March 06, 2018. While some short-term challenges are prevailing, we have a “Hold” recommendation at the current market price of $4.93

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