Why the Santos (ASX:STO) share price is on the radar today

The Santos (ASX:STO) share price is in focus today after the company released its annual results this morning. Here's the lowdown.

Gretchen Kennedy

Gretchen grew up in a small Connecticut town where she learned to read The Wall Street Journal as part of the grade six enrichment program. She moved to Australia in 2002, earned a Master of Arts (Professional Writing) and went on to spend eight years writing on Wall Street. In June 2018, Gretchen returned to Australia and has since developed a keen interest in all things ASX. In December 2020, she started writing for the Motley Fool. Gretchen's usually writing something, reading a book or chasing her dogs around.

Published February 18, 2021 9:34 am AEDT

Santos Ltd (ASX: STO) shares will be in focus today after Australia's second-largest oil and gas producer released its annual results this morning. By the market's close on Wednesday, the Santos share price was fetching $7.04 after dropping by around 4% over the past month.

Let's take a look at what Santos reported.

ASX oil share price buy represented by cash notes spilling out of oil pipe Suez ASX energy shares — Image source: Getty Images

Record annual production

The Santos share price will be on watch this morning after the company reported record annual production of 89 million barrels of oil equivalent (mmboe), up 18% on the year prior.

Despite this, the company still reported an annual net loss after taxes of US$357 million.

Santos advised that the net loss includes previously announced impairments primarily due to lower oil price assumptions. It further noted that both oil and LNG prices were significantly lower than the previous year due to coronavirus.

Sales revenue for the annual period dropped 16% from approximately US$4 billion in 2019 to around US$3.4 billion in 2020.

Santos generated US$740 million in free cash flow for the full year. This is 3.5 times greater than what was delivered in 2016 when oil prices were in a similar range.

Investors will be eyeing the Santos share price in morning trade after the company's board resolved to pay a final dividend of US5 cents per share, fully franked. This is in line with the previous year's final dividend and brings full-year dividends to US7.1 cents per share.

CEO commentary

Reflecting on the annual results, Santos Managing Director and Chief Executive Officer Kevin Gallagher said:

2020 saw us ride through the bottom of the cycle while still generating free cash flow under a sustainable and disciplined operating model. As prices and demand recover, our projects are much better placed than those of our competitor countries. Living by our disciplined approach to cost and capital allocation, and remaining cash flow positive through 2020 means we are well positioned for further efficiency gains and growth initiatives in 2021.

He concluded that:

Our strongly cash-generative base business and diversified portfolio means that we are well positioned to drive free cash flow as commodity prices recover.

Santos share price snapshot

Over the past year, the Santos share price has fallen by around 13%. Santos shares fell as low as $2.73 during March 2020 before recovering to their current levels.

Based on the current Santos share price, the company has a market capitalisation of around $14.6 billion with 2.1 billion shares outstanding.

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