Category: Financial Markets
- Offers a number of core assets within its portfolio (no single asset risk).
- On-going focus on cost reduction and positioning of the business for lower oil price environment.
- Potential M&A activity – the Company has been the subject of several takeover offers.
- Ramp up to GLNG.
- Strong balance sheet position.
- Strategic shareholders (potential corporate activity).
Key Risks
- Supply and demand imbalance in global oil/gas markets.
- Lower oil / LNG prices.
- Not meeting cost-out targets (e.g. reducing breakeven oil cash price).
- Production disruptions (not meeting GLNG ramp up targets).
- Strategic investors sell down their stake or block any potential M& A activity.
1H21 Results Highlights
Relative to the pcp and in US$: Production of 47.3mmboe was up +23%. Sales volume of 53.8mmboe was up +15%. Product sales revenue of $2,040m was up +22%. EBITDAX of $1,231 was up +24%. Underlying profit of $317m is up +50%. STO achieved a net profit of $354m versus a loss of -$289m in FY20. Free cash flow of $572m was up +33%. The Board declared an interim dividend of 5.5cps (versus 2.1 in FY20) and equates to 20% of first half free cash flow, in-line with STO’s sustainable dividend policy which targets a range of 10% to 30% payout of free cash flow. Reported NPAT of $354m includes net gains on asset sales and is significantly higher than the PCP due to impairments included in the previous half-year result.
Company Description
Santos Limited (STO) explores for and produces natural gas, liquefied natural gas, crude oil, condensate, naptha and liquid petroleum gas. STO conducts major onshore and offshore petroleum exploration and production activities in Australia, Papua New Guinea, Indonesia, and Vietnam. The company also transports crude oil by pipeline.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
- The share price has de-rated from a recent high by ~18% (which is valid), provides a buying opportunity in our view.
- The acquisition of Lattice Energy provides a stable mix of producing assets.
- The Company is currently on a 5-year capital expenditure program. The execution and delivery of this program could see upside risks to consensus estimates.
- Favorable industry conditions on the east coast gas market over the long-term –i.e. tight supply could lead to higher gas prices.
- Strong balance sheet
- Potential M&A activity.
Key Risks
- Execution risk – Drilling and exploration risk. Unable to resolve the issue at Western Flank, leading to long-term downgrades to key estimates for the project.
- Commodity price risk – movement in oil & gas price will impact unconstructed / re-contracting volumes.
- Regulatory risk – such as changes in tax regimes which adversely impact profitability.
- M&A risk – value destructive acquisition in order to add growth assets.
- Financial risk – potentially deeply discounted equity rising to fund operating & exploration activities should debt markets tighten up due external macro factors.
- Currency risk
FY21 Results Highlights
NPAT of $317m impacted by $117m non-cash, pre-tax impairment Underlying NPAT of $363m. Underlying EBITDAX of $1,010m and underlying EBITDA of $953m, underpinned by favourable arbitral outcome for the carbon liability associated with a Kupe GSA. BPT retained a strong balance sheet with net debt of $48m, net gearing of 1.5% and liquidity of $402m at 30 June 2021. Management highlighted BPT is in net cash position as of 13 August 2021. The Board declared a final dividend of 1.0 cps, fully franked
Company Description
Beach Energy Ltd (BPT) is an oil & natural gas exploration and production company. BPT has both onshore and offshore operations in five basins (Perth, Cooper, Victoria, and Tasmania & NZ) across Australia and New Zealand. The Company is a key supplier of gas into the Australian east coast gas market. The Company also owns strategic oil and gas infrastructure (Moomba processing facility & Otway Gas Plan
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
