Santos Ltd (ASX: STO) shares are sure getting plenty of attention of late.
First, the S&P/ASX 200 Index (ASX: XJO) energy company has been grabbing headline news over its potential merger with ASX 200 rival Woodside Energy Group Ltd (ASX: WDS).
Then, on Monday, Santos shares closed up 3.7% after the company reported a major legal victory on its $5.7 billion offshore Barossa gas project.
The pipeline laying part of the project, encompassing 262km, has faced lengthy delays from a legal challenge by 11 Tiwi Islanders. Represented by the Environmental Defenders' Office (EDO), the plaintiffs claimed the pipeline would jeopardize numerous ancient culturally significant underwater sites.
But those claims were slammed by the Federal Court, which said the EDO had coached the witnesses on what to say in order to make a stronger case.
Despite Monday's win, Santos shares slid 1.8% in yesterday's trade and are down 0.3% in early trade today, mostly pressured by weak oil and gas prices.
Here's what the experts are saying about the company's Barossa project legal win.
What's the outlook for Santos shares following the legal win?
On the plus side of the ledger for Santos shares, RBC Capital Markets analyst Gordon Ramsay called the court's decision "a positive shift in the broader regulatory landscape" for offshore energy projects.
Ramsay said (quoted by The Australian):
The favourable Barossa pipeline and drilling decisions highlight, in our view, the intricate balance that Santos must maintain between advancing a major project development and navigating the ongoing regulatory and environmental challenges.
Santos shares, alongside other Aussie energy stocks, could also get a longer-term boost from the favourable ruling by increasing the appeal to deep-pocketed foreign investors.
According to Macquarie analyst Mark Wiseman:
The court decision is significant from a sovereign risk perspective. North Asian buyers of Australian LNG have been concerned about this case in terms of resource rights and security of supply of basic energy commodities,
On the other hand, Santos shares could face some headwinds from a potential cost blowout and delays in getting the project into production mode.
Santos could face headwinds from cost blowout
Santos currently maintains that it will deliver the Barossa project on time and within budget.
"We are continuing to work to the budget and schedule as per guidance," a Santos spokeswoman said.
But not everyone is convinced that's still possible, with potential cost blowouts and delays possibly pressuring Santos shares down the road.
As The Australian Financial Review reports, Jarden energy analyst Nik Burns forecasts the project costs could blow out by some $700 million. And he said the project might not start production until early 2026, rather than H1 2025, as Santos intends.
According to MST Marquee energy analyst Saul Kavonic, "At a minimum, ramp-up will be much slower, and costs may increase by hundreds of millions, if not more."
