Santos Ltd (ASX: STO) shares have descended over the past year, but is now the time to buy?
The oil and gas producer's share price has slid 10% in a year to $7.09. For perspective, the S&P/ASX 200 Energy Index (ASX: XEJ) has climbed 7.34% in the past 12 months.
Let's check the outlook for the Santos share price.
What's ahead?
Analysts at Macquarie have retained a "buy" rating on Santos shares with an upgraded price target.
Macquarie is tipping the Santos share price to hit $9.95, a 40% upside on its last closing price.
The team at Morgans was impressed with Santos' latest quarterly results and believes the company's shares are undervalued at their current price.
Santos delivered its first-quarter 2023 results to the market last week. Sales revenue and production both fell 13% compared to the prior quarter.
However, Santos maintained its full-year 2023 production guidance of 86 to 96 mmboe production.
Timing on the company's Barossa Project in the Northern Territory could also be weigh on investors' minds. Drilling activity at the project remains on hold pending the submission and approval of an environmental plan.
In the quarterly report last week, management said drilling activities could recommence "before the end of the year".
Of course, future oil and gas prices can significantly impact Santos shares. The price of crude oil has dropped 28% in a year, while natural gas has shed 67% in the last 12 months, Trading Economics data shows. The price of oil and gas impacts the company's revenue and, in turn, net profit after tax (NPAT).
Commenting on the outlook for the oil and gas price in a research note last Friday, ANZ analysts Daniel Hynes and Soni Kumari said:
Diesel demand is showing bouts of weakness in key markets, while US gasoline remains resilient. China's oil demand recovered to 14.5mb/d. US oil inventories are retreating, while supply growth remains muted. Meanwhile, ample inventories are weighing on gas prices.
LNG imports are rising in Asia ex-China. Falling renewable electricity generation in Europe is likely to stimulate demand for gas.
Share price snapshot
The Santos share price has descended 0.7% in the year to date. However, in the past month, it has climbed 3.5%.
Santos has a market capitalisation of about $23.3 billion based on the latest share price.
