At the time of writing, the energy producer’s shares are up 1.34% to $6.45 apiece.
What’s driving Santos shares higher?
Investors are pushing Santos shares upwards despite the broader S&P/ASX 200 Index (ASX: XJO) sell-off today.
Earlier this morning, Santos released Oil Search’s announcement to the ASX, highlighting progress with the merger.
Oil Search declared that the Papua New Guinea Securities Commission has given its approval for both companies to amalgamate.
Although positive, this is just one of many conditions required for the merger to proceed.
Other clauses within the merger implementation deed relate to clearance from the Independent Consumer and Competition Commission of Papua New Guinea, as well as approval by Oil Search shareholders at the scheme meeting to be held tomorrow.
If all goes according to plan, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held. This would give Oil Search shareholders a 38.5% stake in the newly merged entity. Santos shareholders would retain the remaining 61.5% interest.
The group is aiming to become the ASX’s largest oil and gas company and a top 20 global player. This would give the super-company a diversified portfolio of long-life and low-cost assets with significant growth options.
Another reason Santos shares are moving higher is the rising price of the West Texas Intermediate (WTI). From 1 December, the WTI has surged from trading around US$65.57 per barrel to now US$67.84 per barrel. This represents an increase of about 3.4% over the past few days.
What do the brokers think?
A number of brokers have weighed in on the Santos share price last month following its merger update.
Swiss investment firm UBS raised its price target by 12% to $9.60 for Santos shares, while JP Morgan cut its outlook. The multinational bank reduced its rating by 1.3% to $7.90 per share.
In regard to both brokers’ assessments on the current Santos share price, this implies an upside of around 49% and 23%, respectively.
About the Santos share price
It’s been a disappointing 12 months for Santos shares, moving in circles to register almost flat for the period. It’s worth noting that the company’s share price is nearing its 52-week low of $5.84 seen in mid-August.
Based on today’s price, Santos commands a market capitalisation of roughly $13.4 billion, and has approximately 2.08 billion shares outstanding.