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Santos Upgrades 2025 Production Target

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Santos Ltd (ASX: STO) is an Australian petroleum company. The five main natural gas assets that Santos has an interest in are located the Copper Basin, Queensland, Papua New Guinea, Northern Australia and Western Australia. Santos has a market capitalisation of A$16.8 billion.

Santos Upgrade 2025

What are the key points from Santos announcement today?

Today (3 December 2019) Santos announced an upgrade to their 2025 production target to 120 million barrels of oil equivalent (mmboe). This production level is more than double the production level of 2018. The new target represents a cumulative annual growth rate in production of over 8% to 2025.

Santos key growth portfolios include:

  • Barossa LNG –targeting FID around the end of Q1 2020.
  • Dorado liquids –targeting FEED-entry Q2 2020 (Santos 80% interest Carnarvon 20% interest).
  • PNG LNG expansion –targeting FEED-entry in 2020.
  • GLNG ramp-up to approximately 6.2 mtpa sales from 2020.
  • Cooper Basin production growth.

Santos management notes the outlook for the company is positive due to high demand of natural gas in the future to sustain global energy needs.

CEO Mr Gallagher said:

Natural gas is forecast to supply a quarter of the world’s total energy demand by 2040. Through our Energy Solutions business, we are investing in projects to lower emissions and assessing the significant potential for carbon capture and storage in the Cooper Basin.

The Dorado discovery is particularly exciting for the outlook of Santos. Following the successful Caley flow test in Dorado-3. It was reported that the Caley reservoir flow test exceeded 11,000 barrels of oil per day plus associated gas. Santos notes that the potential flow rate is even higher, but the flow rate was limited by the capacity of the test equipment on the rig. This is a significant oil discovery. The test indicates very high potential flow rates of around 30,000 barrels per day from each production well in the Caley reservoir.

Santos has also updated their 2019 guidance:

  • Production guidance is 74-76 mmboe (previously 73-77 mmboe).
  • Sales volumes guidance is 93-95 mmboe (previously 90-97 mmboe).

Santos is also exploring alternative revenue streams such as carbon capture and storage. The depletion of the Cooper Basin gas fields provides this opportunity over the longer term. This should offset emissions from other projects through carbon credits.

What is the market reaction to Santos announcement?

The market reaction to Santos announcement is slightly positive. Santos share price is down 0.3% and is currently trading at A$8.07. In contrast, the Australian market is sharply down today by 1.8%, which could be the cause for Santos share price to be slightly down. Santos is trading at a forward P/E in the mid-teens and has an annual dividend yield of 1.8% (fully franked).




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.


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