It has been a tumultuous month for the Santos Ltd (ASX: STO) share price. During this timeframe, shares in the oil and gas company have fallen approximately 10%. That might not sound like much to some investors, but in the context of Santos being a $13.3 billion company, it is certainly not a meagre slump.
This brings us to the question, could now be the time to consider making space for Santos in the portfolio? As late and great investor Christopher Browne said, "Buy stocks as you would groceries: when they are on sale," although is Santos really on sale?
Let's review the company's latest activities and broker insights.
What's going on over at Santos?
Firstly, we'll address the elephant in the room. The most notable event happening with Santos is its efforts to merge with Oil Search Ltd (ASX: OSH). Originally Santos submitted a non-binding indicative all-scrip merger proposal to the Oil Search board in late June.
Initially, the proposal offered Oil Search shareholders 0.589 Santos shares – allowing Santos to hold 63% of the merged company. However, this proposal was then revised in early August to 0.6275 Santos shares, thereby reducing Santos' potential stake to 61.5%.
Dampening the excitement of the merger, Papua New Guinea's Prime Minister James Marape recently signalled the merged entity would need to be in the best interest of PNG and its people. The news pushed the Santos share price down 1.2% on the day.
When it rains, it pours… as further revelations arose earlier this week. This time it involved Oil Search and its management. Reportedly, complaints regarding the company's ex-CEO are now in the spotlight as the whistleblower who made them is concerned about a fair inquiry due to the closeness between those involved.
What do experts think of the Santos share price?
In the early stages of the merger announcement, most experts were reasonably bullish on the potential for the creation of an oil and gas giant.
Analysts at UBS said, "We are supportive of the strategic rationale to merge and believe the proposed merger would be both value and FCF accretive."
Although, my colleague Zach Bristow reported on the risks to Santos perceived by the credit rating agencies Standard & Poors (S&P) and Fitch. Both agencies highlighted concerns around the geopolitical risk posed by carrying out business in PNG.
At the time of writing, the Santos share price is down 0.08% to $6.38. It appears investors are more prone to selling while Santos dances with its merger intentions.
