The Santos Ltd (ASX: STO) share price is currently in the red by more than 2% even though the oil and gas ASX share just announced its FY22 half-year report that included huge returns.
It revealed a record result and much larger shareholder returns in the form of a dividend and share buyback.
On top of that, it also announced a final investment decision on Pikka.
HY22 result
It said that underlying profit grew by 300% to US$1.27 billion, statutory net profit jumped 230% to $1.17 billion and free cash flow went up 199% to $1.71 billion.
Santos benefited from the "significantly higher" oil and LNG prices, due to stronger global energy demand as well as a higher interest in PNG LNG after the merger with Oil Search.
It grew the interim dividend by 38% to US 7.6 cents. It also increased its previously-announced on-market share buyback from US$250 million to US$350 million. Profit and shareholder returns can have a big impact on the Santos share price.
Santos also revealed it's in advanced discussions with a shortlist of parties for the sale of a 5% interest in the PNG LNG project. Expected proceeds are in-line with the market consensus valuation, according to management. Santos said it intends to retain a 37.5% interest in PNG LNG.
Pikka final investment decision
As operator of the Pikka phase one oil project located on the north slope of Alaska, Santos announced that the project will proceed.
The expected production is 80,000 barrels per day, with first oil anticipated in 2026. The 2P reserves are 397 million barrels gross pre-royalties. Santos' share of capital expenditure is US$1.3 billion.
Santos is expecting an internal rate of rate (IRR) of 19% at a long-term oil price of US$60.
The ASX share is committed to the project being net-zero, in terms of scope 1 and scope 2. It has entered into memorandums of understanding with Alaska Native Corporations to deliver carbon offset projects.
Santos said this project would add further diversification to its portfolio and reduce geographic concentration risk.
Santos share price snapshot
Since the beginning of 2022, Santos shares have risen by 10%. It is down 20% since 8 June 2022.
