More growth planned for Santos in PNG

Oil and gas producer ups the stakes to capitalise on existing investment.

Times are good for Santos (ASX: STO) investors. The company left shareholders grinning last month by announcing record first-half revenues and then topped that off with the news that the PNG LNG project the company holds a 13.5% stake in is 90% complete.

Now the company has announced plans to expand its presence in Papua New Guinea by participating in three new prospective exploration permits in the country’s Western Province. The agreements mean Santos will take a 30% interest in the permits, partnering with privately owned Mitsubishi and Canadian-listed energy producer Talisman Energy.

According to a map issued by Santos, the three permits range in distances of between about 50km to 100km from oil and gas pipelines that run towards the US$19 billion PNG LNG processing plant, suggesting Santos could capitalise on the project further if a gas discovery is made.

The terms of the deal are confidential, so it is not known what the cost will be to Santos and it is still dependent on approval from the PNG government. This should be no issue given that earlier in the year PNG Prime Minister Peter O’Neill declared his desire to open the door to further LNG investment in the country.

Santos’ current investment in the PNG LNG project is set to start producing returns from next year and will be the first big project to kick-start the company’s growing cashflows. When that happens, Santos CEO David Knox has said the company will consider its dividend policy for shareholders. In August Mr. Knox told The Australian, “We’ve said we’re going to consider growth and rewarding shareholders who have comes with us on this journey.”

It has been a solid 12 months for Santos and the company’s share price has reflected this, up 30% over the last year from $11.65 to $14.96 compared to a 19% rise in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).

Foolish takeaway

Expanding further in PNG is a smart move by Santos, allowing the company to capitalise on its existing investment and take advantage of the government’s desire for increased investment — so shareholders can keep on grinning.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.

More reading


Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »