STO has outperformed its peers through 2024, only slipping 6.7%, aided by a lack of offshore selling; Santos’ (STO) US holdings have held relatively steady, only declining from 15% to 14% since Jan-23. However, recently, STO’s share price performance has not been helped by their 1H24 net cash flow from operations coming in below expectations due to higher production & corporate costs, royalties and restoration spending. Moving forward, STO offers a good balance of new growth without compromising a strong free cashflow profile, differentiating it from peers, another obvious explanation of its recent relatively solid year.
STO and WDS failed to agree on merger terms earlier this year. Still, the $23bn oil and gas company has attracted ongoing takeover speculation, with Saudi Arabia and the UAE touted as potential suitors. We wouldn’t be surprised to see M&A news around STO moving forward, which puts it above WDS from a “buy” perspective for MM.
- We can see STO bouncing between $7 and $8 until the future direction of the global economy becomes apparent.
MM is cautiously bullish towards STO short term
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