Should you buy Santos shares in October?

Is now a good time to pounce on this energy giant's shares? Let's find out.

| More on:
a service station attendant crosses his arms and smiles towards the camera with a backdrop of petrol bowsers and a drive-through facility.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're wanting exposure to the energy sector this month, then Santos Ltd (ASX: STO) shares could be the way to do it.

That's the view of analysts at Citi, which continue to rate the energy producer as a top option in the sector with plenty of upside potential.

What is the broker saying about Santos shares?

According to a recent note out of the investment bank, its analysts have a buy rating and a $9 price target on its shares.

Based on the latest Santos share price of $7.42, this implies potential upside of 21% for investors over the next 12 months.

In addition, with the broker forecasting a 25 cents per share dividend in FY 2024, this represents a 3.3% dividend yield, which boosts the total potential return to almost 25%.

Alaska potential

Citi has been looking at Santos' Pikka project in Alaska and believes that recent actions demonstrate the potential of its assets in the region. It said:

The designation of core vs non-core for Alaska is a semantic argument in our view. STO's actions are speaking louder than words with STO appearing very much committed to the asset: Phase 1 is US$1.3bn capex net to STO, the farm down target is only for a minority share as opposed to a complete disposal, and phase 2 "optionality" is being touted.

This detailed site trip note should help investors gauge why we have, for the first time, confidence in STO's capabilities as an operator in Alaska, what signposts to look for to ascertain phase 1 execution risks, why there's a risk of negative surprise to SIB capex, and an assessment of capex synergies and returns for phase 2 expansion. From a valuation perspective, higher phase 1 opex and capex is largely offset by a higher phase 2 valuation; retain A$9/shr target price. Buy.

Santos shares are down over 4% since this time last year.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Man holding Australian dollar notes, symbolising dividends.
Dividend Investing

Which major ASX energy share will pay the best dividend yield in FY24?

And are ASX energy shares usurping mining and banking stocks when it comes to dividends?

Read more »

A miner stands in front oh an excavator at a mine site
Energy Shares

Why is everyone talking about ASX uranium shares like Paladin Energy lately?

ASX uranium shares have enjoyed a stellar year. And there may be more good times ahead.

Read more »

A male electricity worker in hard hat and high visibility vest stands underneath large electricity generation towers as he holds a laptop computer and gazes up at the high voltage wires overhead.
Energy Shares

Owners of AGL shares need to know how much electricity demand could grow by 2050

This tailwind could be electric for this ASX energy stock.

Read more »

woman holds sign saying 'we need change' at climate change protest
Energy Shares

ASX coal stocks feeling the heat after climate protesters' Port of Newcastle blockade

The big ASX coal stocks are trading lower on Monday morning.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Energy Shares

Why you should vote your Origin shares in favour of its takeover

Brookfield believes investors should be accepting the offer that's on the table.

Read more »

A pair of legs can be seen on the floor buried under a pile of paperwork, indicating a high volume day.
Share Market News

Here's how the ASX 200 market sectors stacked up this week

The ASX 200 fell 0.14% during a lacklustre week of trading.

Read more »

A man pulls a shocked expression with mouth wide open as he holds up his laptop.
Energy Shares

Why this ASX uranium stock is rising (and could jump 25% more)

Bell Potter is saying good things about this uranium stock.

Read more »

A woman crosses her hands in front of her body in a defensive stance indicating a trading halt.
Energy Shares

Own Origin shares? Why you should vote against its takeover

AustralianSuper says investors should say no to a takeover.

Read more »