The strong run of the Santos Ltd (ASX: STO) share price has continued today with a further 2.5% gain to $4.17.
This brings the oil and gas company's three-month return to an impressive 42%.
Why are its shares higher today?
Although Santos' shares were likely to have been given a lift from oil prices rising overnight for the third consecutive session, I suspect the main driver of today's gain is a broker note out of the equities desk at Macquarie.
That note revealed that the broker has retained its outperform rating and increased the price target on its shares to $4.60.
According to the note, Macquarie expects Santos to benefit from the shutdown of two trains at the Queensland Curtis LNG Project.
As a result, it expects Santos to hit the top end of its full-year sales guidance, allowing it to deliver a strong FY 2017 result which comfortably beats the market's expectations.
Should you invest?
I continue to believe that Santos is one of the standout investment options in the resources sector at the moment and would choose it ahead of rivals Woodside Petroleum Limited (ASX: WPL) and Oil Search Limited (ASX: OSH).
I believe the hard work that management has done to cut costs will result in bumper free cash flow growth in FY 2017 and FY 2018, ultimately putting it in a position to consider paying a dividend once again. Just as long as oil prices remain favourable, of course.
