The Santos Ltd (ASX: STO) share price is up 0.5% in early trade despite a retrace in oil prices overnight.
Santos shares closed on Friday at $7.94 and are currently trading for $7.98.
While that already represents a 20% gain year-to-date, on the back of soaring oil and gas prices, Macquarie just upgraded its Santos share price target well beyond the current level.
Why is Macquarie bullish on the ASX 200 energy giant?
It's not rocketing oil prices that has Macquarie upping its target for the Santos share price. Rather it's the significant oil discovery announced last week at the company's Bedout Basin project in Western Australia.
Santos holds the project in a joint venture with Carnarvon Energy Ltd (ASX: CVN). Prior to last week's new discovery, the Bedout Basin already held proven reserves of some 200 million barrels of liquids and 1.1 trillion cubic feet of gas, according to data from Carnarvon.
Commenting on the new discovery, Santos CEO, Kevin Gallagher said, "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."
Macquarie analysts say the discovery increases the value of the joint venture Dorado project.
As reported by The Australian, "Macquarie factors an increase of 2-5% in earning per share for Santos on increased near-term production."
Macquarie has an outperform rating on the ASX 200 energy stock, increasing its target for the Santos share price from $7.89 to $10.50.
That's 32% above the current level.
Santos share price snapshot
The Santos share price has been a clear beneficiary of soaring oil and gas prices.
Though Brent crude oil slipped 2.8% overnight to US$117 per barrel, it's still up 50% from the US$78 per barrel it was worth on 1 January this year.
That's helped propel the Santos share price 26% higher year-to-date with shares up 11% over the past month.
But comparison, the S&P/ASX 200 Index (ASX: XJO) is down 2% in the new year.
