MENU

Shares in Santos Ltd trade at $6: Will it get a better takeover bid?

Shares in oil and gas company Santos Ltd (ASX: STO) were up 0.25% to $6.00 on Thursday after the release of the company’s quarterly update, and shares are up an impressive 63% over the past 12 months.

Clearly, Harbour Energy’s recent takeover bid, that prices Santos at $6.50 a share, contributed to the stock’s performance – but Santos’ last quarterly report proves that the company is in better shape now than it was one year ago.

The company sold its oil at an average realised price of US$71.6 a barrel in the March 2018 quarter, nearly twice as much as breakeven price and up 24% on the March 2017 quarter. The prices for Santos’ liquefied natural gas (LNG) and domestic sale gas also increased 16% and 9% respectively over the same interval.

Santos took advantage of high commodity prices to continue strengthening its balance sheet. The company’s net debt of US$2.5 billion is 8% lower since the start of 2018 and 47% lower since the start of 2016. If prices stand strong, the company will achieve its end-2019 net debt target of $2 billion by the second half of 2018.

Price improvements overshadowed the temporary decline in production volumes experienced during the quarter, due to planned maintenance work and the earthquake in Papua New Guinea that caused a temporary shutdown of Santos’ LNG projects in February.

Santos produced 13.8 million barrels of oil equivalent (boe), 8% less than in the previous quarter, and revised the upper end of its FY2018 production guidance from 60 million boe to 58 million boe, leaving the lower end unchanged at 55 million boe.

As for Harbour’s takeover bid, Santos remarked that the proposal is at this stage still indicative, and it is not sure whether it will result in an offer recommended by the board.

Foolish takeaway

The latest takeover proposal from Harbour comes at a 28% premium on the stock’s price at March 29, the last day of trade before the offer was announced. Despite the prudent declarations from the quarterly report, I’d be surprised to see the offer rejected.

However, the company is doing so well that its share price could grow even if the acquisition failed.

Japanese Billionaire’s Prediction Will Give You Goosebumps

When a veritable investing and entrepreneurial genius speaks, it pays to listen.

In fact, he's now preparing a $100B "war chest" to invest entirely in this "terrifying" new technology, which could spell huge profits for investors.

Click here to learn about this technology and how you can profit!

Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!