The Santos Ltd (ASX: STO) share price is trading lower on Wednesday.
In morning trade, the energy producer's shares are down 0.5% to $7.76.
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Why is the Santos share price falling?
The Santos share price is falling today after oil price weakness offset the release of a positive announcement relating to its Pavo-1 exploration well.
According to the release, drilling activities at the Pavo-1 exploration well have confirmed a significant oil discovery 46 kilometres east of the Dorado field in the Bedout Sub-basin, offshore Western Australia.
The release highlights that the well was drilled on the northern culmination of the greater Pavo structure and encountered a 60-metre gross hydrocarbon column in the primary Caley member reservoir target.
Management notes that the result at Pavo-1 significantly de-risks the hydrocarbon bearing potential of the separate southern culmination of the greater Pavo structure. The southern culmination has an additional best estimate P50 prospective resource of 40 mmbbl gross, of which Santos has a 70% interest. The remaining 30% interest belongs to Carnarvon Energy Ltd (ASX: CVN).
Management commentary
Santos' Managing Director and Chief Executive Officer, Kevin Gallagher, was pleased with the discovery and believes it could add material value to the Dorado project.
He commented: "The Pavo-1 success is expected to support a potential low-cost tie-back to the first phase of the proposed Dorado development, with Pavo north having an estimated breakeven cost of less than US$10 per barrel, and future gas production from the Bedout basin providing a source of supply into our existing domestic gas infrastructure in Western Australia."
"With the global oil and gas markets seeing increased volatility, low-CO2 oil and gas resources at Dorado and Pavo add significantly to Australia's national energy security. It is also very encouraging for the next exploration well in the current campaign, Apus-1, which offers another potential nearby low-cost tie-in opportunity to the Dorado development. The Pavo-1 well result also proves the petroleum system in the basin is effective over a greater area, de-risking a number of nearby low-cost opportunities," Mr Gallagher added.
