Santos (ASX:STO) share price lower despite record FY 2021 performance

Santos delivered a record performance in FY 2021…

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Key points

  • Santos had a record year in 2021 and was able to take advantage of strong energy prices
  • The merger with Oil Search completed late in the year
  • This sets Santos up to “deliver even stronger outcomes in 2022”

The Santos Ltd (ASX: STO) share price is on the move on Thursday morning.

At the time of writing, the energy producer’s shares are down slightly to $7.18.

Why is the Santos share price falling?

The Santos share price is falling today despite the release of its fourth quarter update which revealed a record performance in FY 2021.

According to the release, Santos achieved production of 22.9mmboe during the fourth quarter. This was up 5% quarter on quarter but a touch short of the market’s expectations. Nevertheless, this took its full year production to a record of 92.1mmboe, which is up 4% year on year. This includes 1.7mmboe from Oil Search assets following the completion of their merger on 11 December.

The energy giant also revealed a 7% increase in sales volume to 26mmboe for the quarter. Though, this wasn’t enough to stop the company from posting a 3% decline in annual sales volume to 104.2mmboe.

Pleasingly, thanks to stronger pricing, Santos still recorded a 34% increase in quarterly sales revenue to US$1,532 million and a 39% lift in annual sales revenue to US$4,714 million.

And while Santos reported a 62% increase in annual capital expenditure to US$1,387 million, that couldn’t stop the company from generating US$1.5 billion in free cash flow for the year. This was a record and more than double 2020’s level.

Santos’ Managing Director and Chief Executive Officer, Kevin Gallagher, commented: “Our disciplined, low-cost operating model continues to drive strong performance across the business and has positioned us to take full advantage of the increase in commodity prices. The completion of the Oil Search merger delivers us the size and scale to deliver even stronger outcomes in 2022 and beyond.”

“Our merger with Oil Search delivers increased scale and capacity to drive a disciplined, low-cost operating model and unrivalled growth opportunities over the next decade – with a vision of becoming a global leader in the energy transition,” he added.

Guidance for FY 2022 will be provided with its full year results next month.

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