What: Oil and gas major Santos Ltd (ASX: STO) is continuing to suffer as a result of the falling oil price. Having closed Wednesday's session at $9.08, the shares sank as low as $8.13 – representing a fall of over 10% – in early trade on Thursday. At the time of writing they have regained some composure to be trading down 6% at $8.50.
So what: The cause of today's share price plunge was the release of a market update by Santos. In the one page announcement the company advised the market that it had decided to defer a European hybrid issue – a capital management initiative flagged as recently as last week.
In an attempt to pour cold water on any speculation over balance sheet issues, the release also noted that the $9 billion energy producer had "a robust funding position, including approximately A$2 billion in available liquidity." It was also noted that there was no intention to undertake an equity raising.
Now what: While Santos was obviously trying to quell investors' concerns, the selloff in the stock suggests it has had limited effect. The additional guidance that the company plans to significantly reduce capital and operating expenditure in 2015 certainly highlights the rapid change in outlook that has occurred in a short space of time.
Oil and gas producers and explorers across the ASX have been getting hammered in recent weeks and this latest announcement by Santos doesn't offer much hope that the bottom is in sight for investors. Having said that, with Santos' share price off over 40% in the past three months, along with peers Beach Energy Ltd (ASX: BPT) and Karoon Gas Australia Limited (ASX: KAR) down 43% and 31% respectively too, there may be some value starting to emerge in the sector.
