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Here’s what makes Santos shares ‘a really exciting proposition’: expert

Could the Santos share price keep climbing?
The post Here’s what makes Santos shares ‘a really exciting proposition’: expert appeared first on The Motley Fool Australia. –

An analyst has expressed an optimistic outlook for the shares of energy producer Santos.

The Santos share price climbed 2.69% in a week, from $7.80 on 26 April to the current price of $8.01.

Let’s take a look at why one expert recommends Santos.

What’s the outlook for Santos shares

Santos is an “exciting proposition”, Firetrail Investments portfolio manager Blake Henricks believes.

Speaking to Livewire, Henricks outlined how the company’s disciplined approach to capital could help the Santos share price. He outlined how the free cash flow break-even price of oil for Santos was previously close to $60 a barrel, but is now about $25. He said:

Now, one of the challenges I think of Santos, if we go back a year ago, because of all this capital expediture (CAPEX) they were spending, the break-even was probably close to $60 a barrel.

And so it looked like they weren’t going to generate much free cash flow. Subsequent to that, they have taken over Oil Search at a very good point in the cycle. And now what they’re undergoing or undertaking is an attempt to sell down some assets.

Santos reported record oil production and sales revenue of US$1.9 billion in quarterly results released in April. This was 25% higher than the previous quarter.

Free cash flow increased 186% on the previous corresponding period to US$865 million.

Henricks emphasised Santos’ asset sell-off could be positive for company shareholders. He added:

If they are successful in that, we expect very high shareholder returns for the medium term for Santos shareholders. And that’s what makes it a really exciting proposition.

Santos completed the merger with Oil Search in late 2021.

Santos share price snapshot

The Santos share price has gained 15% in the past 12 months while it has surged nearly 27% in the year to date.

In comparison, S&P/ASX 200 Index (ASX: XJO) has returned less than 5% in the past year.

Santos has a market capitalisation of about $27 billion based on the current share price.

The post Here’s what makes Santos shares ‘a really exciting proposition’: expert appeared first on The Motley Fool Australia.

Should you invest $1,000 in Santos right now?

Before you consider Santos , you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Santos wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

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Broker says Santos share price could storm 27% higher

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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