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3 reasons why Santos Limited is looking forward to earnings gains in the next year

Oil and gas producer Santos Limited (ASX: STO) is seeing renewed share price strength in the past month. From mid-April, it is up about 7.4% to $14.13 and rising above the downward trend it has been on since September last year.

What is making the market revise its expectations of the company?

1-    Recent announcements about the PNG LNG project reaching completion is a plus, of which the company has a 13.5% stake in it. First exports should be ahead of schedule and start before the middle of this year.

The second LNG processing plant, or “train”, is due to start production within the next several weeks.

2-    The Queensland-based GLNG project is more than 80% complete and on schedule for first LNG in 2015. It is a joint venture with three of the largest energy companies in the world – PETRONAS, KOGAS and Total.

It has also entered agreements with both Queensland Gas Company and the Australia Pacific LNG project (APLNG) for more efficient development and transport of gas resources. The two projects’ port facilities are near one another and coordinating development will avoid the need to build additional infrastructure. That will help save time and money for Santos.

3-    The company is progressing with its shale oil and gas development in the Cooper Basin, working in part with other producers such as Beach Energy Limited (ASX: BPT) and Senex Energy Ltd (ASX: SXY). Santos has extensive infrastructure in the region that the two other producers can access a relatively short distance from their exploration and development sites.

Gas produced here can be sent on to Queensland as part of the GLNG project resources.

The stock has a dividend yield of 2.2% and a PE of 25.3. Analyst expectations are for a big increase in earnings in 2015 due to the new production from the two LNG projects.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.