Can the company’s shares rebound?
The post The Santos (ASX:STO) share price is down 6% this month. What’s next? appeared first on The Motley Fool Australia. –
The Santos Ltd (ASX: STO) share price has been an underperformer compared to the S&P/ASX 200 Index (ASX: XJO). The energy producers’ shares are down 6% this month alone versus the ASX 200 which is up almost 2%.
And today is no different, with the company’s shares further sliding, down 1.15% to $6.04
What is going on with Santos shares?
It seems the Santos share price can’t catch a break after the company reported its half-year results on 17 August.
Santos reported revenue of US$2.04 billion, up 22% over the prior corresponding period (US$1.17 billion). The strong performance was driven by record production of 47.3 mmboe (million barrels of oil equivalent) and record sales volumes of 53.8 mmboe.
This came despite lower average LNG (liquified natural gas) prices due to the company fulfilling long-term offtake contracts.
Overall, Santos’ bottom line came to a net profit after tax of $354 million. A massive swing of $643 million compared to a net loss after tax of $289 million achieved in H1 FY20. Santos attributed the turnaround to the lower after-tax impairment loss of $6 million, compared to the $526 million recorded in FY20.
However, while its FY21 results were solid, the company has recently been hit by damming allegations.
Just last week, media reports surfaced that Santos is being taken to the Federal Court over misleading and deceptive statements.
The Australasian Centre for Corporate Responsibility (ACCR) says that Santos is claiming to be a clean energy producer. In addition, the activist group disputed the fact that Santos has a pathway to achieve net zero emissions by 2040.
This carries weight given Santos seeks to expand production capacity at its Barossa gas/LNG project and Dorado oil field development. The ACCR argues it’s near impossible to not produce more emissions when expanding operations.
Santos is yet to formally respond to the accusations by the ACCR. It did say however it would not be appropriate to comment on matters before the court.
So, what’s the outlook for the FY21 full year for Santos?
Court cases aside, Santos is maintaining its sales volume guidance of between 100 mmboe to 105 mmboe.
Production guidance on the other hand is forecasted to be in the range of 87 mmboe to 91 mmboe. The lower second-half production volumes are due to the 25% sell-down in Bayu-Undan and DLNG which was completed in April.
Furthermore, the Santos and Oil Search Ltd (ASX: OSH) merger process is currently underway. Exclusive mutual due diligence is being conducted with a binding merger implementation deed targeted for September, and scheme vote by November.
Santos share price summary
It’s been a disappointing year for Santos shareholders, with the company’s share price down 4% this year. When factoring in the last 12 months, Santos shares are up around 6%, representing mediocre gains.
Based on valuation grounds, Santos commands a market capitalisation of roughly $12.5 billion, with approximately 2 billion shares on issue.
Should you invest $1,000 in Santos right now?
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. 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 Bruce Jackson.