Santos Ltd

STO Details 
· Boosting capital position: Santos Ltd (ASX: STO) stock lost over 10.7% on 15 December 2016 while the group completed its A$1,040 million fully underwritten institutional placement at A$4.06 per share price, which is 7.9% discount to the last closing price. Santos got good demand for this offer indicating strong investors’ confidence on this low cost, reliable company. Santos is expanding their financial flexibility to position themselves even in low oil price environment. Despite boosting capital position, the group’s new strategy efforts would further enhance their business. STO intends to focus on five core, long-life natural gas assets: Cooper Basin; GLNG; PNG; Northern Australia, and Western Australia Gas. The group is also focusing on capital management and aiming for US$1.5 billion reduction in net debt to less than US$3 billion by the end of 2019 by generating a better operating cash flow.

· Recommendation: The above move has left the market puzzled with concerns on capital raising as the group never reported any liquidity related issue and thus the stock plummeted on ASX. There may be a part pull-down by commodity prices which got an impact from the Fed rate hike. On the other hand, the move may also be an opportunistic one considering the recent share price movements and other favorable factors. STO stock had otherwise recovered about 15.5% in the last four weeks (as of 14 December 2016) driven by OPEC and non-OPEC members efforts to cut production. We maintain a “buy” on the stock at the current price of - $ 3.94

Regis Resources Ltd

RRL Details
· Gold prices fall dampened the stock sentiment: Regis Resources Ltd (ASX: RRL) stock fell about 7.9% on 15 December 2016 due to falling gold prices. US Fed’s interest rate hike has dampened the gold prices sentiment. Moreover, the group produced gold of 74,612 ounces in September quarter as compared to the June 16 quarter production of 78,471 ounces. This is at the lower end of the annual guidance range of 300,000 - 330,000 ounces. RRL has sold 73,607 ounces of gold at a relatively higher average price of A$1,765 per oz in the September quarter and ongoing falling in gold prices would impact the margins.

· Recommendation: RRL stock lost over 28.7% in the last three months (as of 14 December 2016) and we believe the pressure in the stock would continue. We give an “Expensive” recommendation at the current price of - $ 2.54

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