The Santos Ltd (ASX: STO) share price is rising after the release of the first quarterly update since the company turned down a $14.6 billion takeover bid from Harbour Energy in May. At the time of writing, the stock was up 2% to $6.06.
During takeover talks, Santos’s results gave the impression of a healthy business, supported by buoyant oil prices.
Today’s release seems to confirm that impression.
Santos’s production and sales were only marginally above the previous quarter, but a 10% increase in the average realised oil price to US$78.60 a barrel contributed to a lift in revenues by 12% to US$886 million.
In the three months to June 30, the price for Santos’s oil was nearly 50% higher than last year.
The company has a net debt of US$2.4 billion and seems well on its way to achieve its end-2019 net debt target of US$2 billion by the second half of 2018.
According to Santos’s CEO Kevin Gallagher, “this positions the company to return to sustainable dividend payments”.
Santos will target a range of 10% to 30% payout of free cash flow per annum, considering additional distributions when the business cycle permits. The company hasn’t paid dividends since 2016.
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