Santos Ltd (ASX: STO) shares haven't shot the lights out over the past year. But they've strongly outperformed those of rivals Woodside Energy Group Ltd (ASX: WDS) and Beach Energy Ltd (ASX: BPT).
All three of the S&P/ASX 200 Index (ASX: XJO) energy stocks have come under pressure amid slumping oil and gas prices. And all three have faced their own individual issues over the year.
Still, as of yesterday's close, Woodside shares are down 17% in 2024, and Beach Energy shares are down 21%.
Which puts the 3% year to date decline in Santos shares in perspective. Particularly if you consider that Santos stock trades on an unfranked 6.2% dividend yield (part trailing, part pending).
And with a number of the company's multi-billion dollar projects scheduled to start producing in 2025 and 2026, the year ahead could look much brighter for shareholders.
Santos reported its half year results on Wednesday. We'll see what Moody's take is on those results below.
But first, a quick recap.
Revenue down, dividends up
Among the core metrics, Santos reported half-year sales revenue of US$2.7 billion, down 9% year on year. Production came in at 44 million barrels of oil equivalent (mmboe), down 2%.
But Santos pleased passive income investors with an all-time high interim dividend of 13 US cents per share, up 49% from the prior interim dividend.
On the major project front, management said the Barossa Gas Project is close to 80% completed. First gas is expected in the third quarter of the 2025 calendar year.
Commenting on the progress at Barossa that could offer long-term tailwinds for Santos shares, CEO Kevin Gallagher said:
We're excited with our progress and the outlook at Barossa with initial results from the third well showing excellent reservoir quality and thickness. At full production rates, Barossa is expected to add around 1.8 Mtpa to Santos' expanding LNG portfolio.
Moody's post-earnings take on Santos shares
Following the release of the ASX 200 energy stock's half-year results, Saranga Ranasinghe, senior analyst at Moody's Ratings, ran a slide rule over Santos shares.
"Santos' results for the six months ended June 2024 are in line with our expectations, reflecting the company's strong operating profile and sustained relatively low-cost production despite inflationary pressures," Ranasinghe said.
Ranasinghe added:
Although Santos' earnings and cash flow declined due to lower production and LNG prices compared with the prior period's prices, its leverage metrics were within our rating thresholds.
Under our base case, we expect Santos to maintain sufficient headroom against our rating parameters and generate strong liquidity to support its likely high capital expenditure over the next 12 months.
As for how the Barossa project might impact Santos shares in the months ahead, Ranasinghe said:
While the company's Barossa project is expected reach first gas production in the third quarter of 2025, we continue to monitor the project's progress and any announcements around delays or budget overruns.
And Moody's sounded pleased with Santos' balance sheet.
"Santos' liquidity remains excellent. We expect that Santos will manage shareholder returns, growth spending and its equity positions in projects in a way that preserves its credit profile," Ranasinghe said.
