The Santos Ltd (ASX: STO) share price is moving to greener pastures on Thursday after publishing its fourth-quarter report.
Shares in the oil and gas producer are inching 0.7% ahead to $7.67 as we head into the afternoon. While it may not be a monumental move, it beats today's measly 0.27% gain from the S&P/ASX 200 Index (ASX: XJO).
However, Santos shares remain rangebound between $6.90 and $8.00. Roughly floating between these two price points, the energy major has failed to meaningfully break out of this range for a year and seven months.
Quarterly uptick bolsters Santos share price
Here are the main takeaways from the quarter ended 31 December 2023:
- Production of 91.7 million barrels of oil equivalent (MMboe) year-to-date 2023, down 11%
- Quarterly production up 1% to 23.4 MMboe versus the third quarter
- Quarterly sales volume up 5% to 25.3 MMboe
- Quarterly sales revenue up 3% to US$1.486 billion (A$2.26 billion)
The bulk of fourth-quarter revenue for Santos, like Woodside Energy Group Ltd (ASX: WDS), was derived from LNG sales. Approximately 63% of revenue came from liquefied natural gas, benefitting from increased volume and a slightly higher average realised price.
A modest increase in LNG prices helped offset a reduction in the average realised price for crude oil during the quarter. As shown in the table above, Santos saw its crude price slip from US$89.97 a barrel to US$88.04.
What did management say?
Commenting on the quarter, Santos managing director and CEO Kevin Gallagher said:
The fourth quarter brought free cash flow for the full year to $2.1 billion, an outstanding achievement in what has been a challenging year.
It positions us well to deliver shareholder returns, backfill and sustain our existing business, complete our major projects, Barossa and Pikka, progress our decarbonisation plans and grow our Santos Energy Solutions business.
Touching on the recent merger talks with Woodside Energy, Gallagher explained:
As previously announced, Santos is in early-stage discussions to evaluate the merits of a potential merger with Woodside. The parties have agreed to exchange information to assess the benefits for our shareholders. Santos continues to consider alternative options to accelerate value for shareholders. There is no certainty that any transaction will eventuate from these discussions.
Woodside CEO Meg O'Neill provided a similar statement in its quarterly report yesterday.
What's next?
Santos confirmed its full-year 2023 guidance remains unchanged. Investors will be able to see all the nitty-gritty details when the energy giant publishes its results for the year on Wednesday, 21 February.
Meanwhile, guidance for 2024 showed an estimated reduction in production and sales volumes. While 2023 is expected to see 89 MMboe to 93 MMboe produced, management is mapping out 84 MMboe to 90 MMboe in 2024.
Likewise, sales volumes are forecast to slide from 90 MMboe to 100 MMboe down to 87 MMboe to 93 MMboe.
Santos share price snapshot
The Santos share price has struggled to outperform its peers or a benchmark index. Over the past five years, shares have risen 21.6% compared to the 27.7% gain from the S&P/ASX 200 Index (ASX: XJO).
Factoring in dividends, the return increases to 39.3%, still 19% behind the benchmark.
Based on the current Santos share price, the company trades on a price-to-earnings (P/E) ratio of 9.6 times. This is a notable premium to the industry average for the Australian oil and gas industry.
