The Santos Ltd (ASX: STO) share price is flat this morning after the LNG giant posted record production of 18.4 million barrels of oil equivalent (booe) over the quarter ending March 31 2019.
In fairness the record production only came about after it started accounting for production at its Qudrant Energy asset that it recently bought off a Macquarie Group Ltd (ASX: MQG) led conglomerate for $2.9 billion.
In total sales revenue also climbed 28% to $1,015 million (the second highest quarter on record) which translated into a record $327 million in free cash flow over the period.
Sales probably came in below record production due to lower weaker average prices for oil and LNG over the quarter, which is something that Santos's LNG peer and joint venture partner Oil Search Limited (ASX: OSH) flagged in its trading update yesterday.
The millstone around Santos's share price for a few years has been its crippling debt load that it managed to reduce to a gross amount of $4.4 billion over the quarter, with net debt of $3.4 billion before taking into account the "impact of new AASB leasing standards."
This kind of leverage is no joke and would put a lot of serious investors off the stock, however, for those prepared to take on more risk (including over the outlook for energy prices) then Santos does have potential to post big returns if free cash flow and dividends rise. However, I'm not a buyer of Santos shares.
