Australian Investment Blog
ASX:STO 26/09/2018
Santos (STO) looking to ramp up production
Stock
Santos (STO) $7.24 as at 26/09/2018
Event
While the other energy names trade over 1% higher today, Santos is currently trading over -1% below yesterdays close while they hold their 2018 Investor Day. Their presentation showed plans to nearly double oil production over the next 7 years to produce around 100 million barrels a year while still keeping a lid on costs within the business. The acquisition of WA gas company Quadrant Energy, currently seeking regulatory approval, will go some way to bridging the gap by adding around 19 barrels of oil equivalent (boe), Santos also plans to leverage the core assets in Australia and PNG to ramp up output.
While Santos is the lowest cost onshore producer, their targets could also make it one of the biggest in Australia.
Santos (STO) Chart
Market Matters Take/Outlook
History shows that Santos has a poor track record in terms of production expansion and acquisition. Although we see some legs in this run in energy prices from here, it feels like STO is once again upscaling at the wrong point in the cycle. We’d like them to be selling strength rather than buying strength as they have announced today.
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