The journey to renewable energy will be made possible through the provision of gas, Kevin Gallagher, CEO of S&P/ASX 200 Index (ASX: XJO) energy share Santos Ltd (ASX: STO), told an industry conference on Thursday.
It comes after the company faced criticism from activist investor groups earlier this year.
The Santos share price has tumbled 12% since this time last year. Though, it remains 16% higher than it was five years ago, trading at $7.24 at the time of writing.
For comparison, the ASX 200 has gained 1% over the last 12 months and 19% since May 2018.
So, do brokers think Santos shares are worth buying? Let's take a look.
'Our opponents are only about killing oil and gas': Santos CEO
Speaking to an Australian Petroleum Production and Exploration Association (APPEA) conference today, Gallagher said, "the main game is gas because it makes renewables possible", continuing:
While getting to net zero should be all about emissions reductions, our opponents are only about killing oil and gas.
Which is why they now seek to discredit carbon capture and storage (CCS) as well.
The company is developing its Moomba CCS project in South Australia. It's also planning to create two more CCS hubs in the Northern Territory and Western Australia.
The Moomba CCS project is expected to help remove carbon dioxide from the atmosphere by injecting it into geological reservoirs.
Up to 1.7 million tonnes of carbon dioxide is expected to be stored in the project each year following its first injection, set to go ahead in 2024.
Gallagher today said the company could decrease the cost of the energy transition if it were able to deliver abated gas to customers for around US$24 per tonne of carbon dioxide.
That could lessen the burden of "energy poverty" potentially born from the transition, he said.
President of the company's decarbonisation-focused business Santos Energy Solutions, Brett Woods commented earlier this week:
The project will support Santos to reduce our own emissions but crucially, we're also working with other hard-to-abate sectors to look at ways of using Moomba CCS to help reduce their emissions, too.
Activist investor groups demand change
But activist investor groups Snowcap Research and Market Forces have hit back at the company's other development plans. In a letter to the company's board, sent in March, Snowcap said Santos has "lost its way", continuing:
Since 2021, Santos has pivoted to a growth strategy, committing to by far the most aggressive growth capex plan of any major listed oil and gas company globally.
It said the strategy has caused the Santos share price's "drastic underperformance" compared to its peers. It believes a reformed Santos could unlock a 30% to 50% upside for shareholders and better align the company with the energy transition.
Market Forces also rebuked the company's current growth ambitions following its April annual general meeting (AGM). The group said it has analysed the company's oil and gas expansion strategy and found it on course to increase its overall emissions by 40% between 2022 and 2030.
What do brokers think of Santos shares?
Despite the controversy facing the company's growth plans, many brokers are bullish on the Santos share price.
Bell Potter investment advisor Christopher Watts recently tipped Santos shares a buy, saying the energy stock is "discounted", with "the lowest implied oil price", as per The Bull, continuing:
[Santos] is geographically diversified. Also, it offers a diversified product mix across LNG, domestic gas, crude oil, and liquids.
Brokers Morgans and Macquarie are also bullish on the stock, my Fool colleague James reported earlier this month.
They've hit Santos shares with respective price targets of $8.75 and $9.95, representing upsides of 20.5% and 37%.
