Santos hits three-year share price high
Santos has punched through to a three-year trading high on the back of steady first quarter results and a recent takeover offer from Harbour Energy.
The oil and gas company reached $5.99 a share on Thursday, marking the first time it has hit this trading point since mid-2015. The company was trading at $2.90 last July.
Santos has focused heavily on reducing its debt, cutting it by around 8 per cent since the start of the 2018 and nearly half since the start of 2016.
Net debt currently sits at around $2.5 billion.
"Santos is now set up to reap the benefits of higher oil prices and continue to build value," Santos chief executive Kevin Gallagher said.
The shutdown of its Papua New Guinean LNG assets following a devastating 7.5 magnitude earthquake in February – which had a massive impact on its joint venture partner Oil Search, which slashed production by a third – appears to have not slowed the momentum of Santos, although combined with planned maintenance at Moomba in South Australia and in Queensland, it made an 8 per cent dent in production levels.
"The temporary PNG LNG shutdown, combined with planned maintenance at our facilities in Moomba and Queensland reduced first quarter production by 1.2 million barrels of oil equivalent (MMboe) to 13.8 MMboe," Mr Gallagher said.
"Excluding these shutdowns, production would have been in line with the prior quarter."
RBC Capital Markets analyst Ben Wilson said the reduction in output is still at the higher end of guidance and "are in line with our expectations due to the outage at PNG LNG".
Despite this lower production level, an average realised oil price that is six per cent higher quarter on quarter, and nearly 25 per cent higher compared to this time last year, has ensured sales revenues remain buoyant.
Santos saw an average oil price of $US71.6 ($91.93) per barrel with a break-even price of around $US36 per barrel.
The renewed $6.50 a share bid by Harbour Energy for Santos, a 42 per cent increase on its previous $4.55 bid, continues to hang over the company as it advises shareholders to take no action until a board decision.
"We will engage with Harbour Energy on its proposal to determine whether an offer for the company that is capable of recommendation by the Board for consideration by shareholders can be developed," Mr Gallagher said.
Mr Wilson said Harbour’s latest bid has likely hit the mark.
"We think that the renewed Santos Board will find it hard to turn down the offer."