The Santos Ltd (ASX: STO) share price has had an excellent 2026 to date, rising more than 26%. The S&P/ASX 200 Index (ASX: XJO) is virtually flat. The business has clearly been indirectly positively affected by events in the Middle East.
As the chart above shows, the business is close to a 52-week high. The question is whether the ASX energy share is a buy given elevated profit generation, or whether this is a good time to sell given the boosted valuation.
I'm not an expert on ASX energy shares, so I'm going to look at the opinion of fund manager L1 Group Ltd (ASX: L1G), which likes to hunt for opportunities across a variety of sectors. Let's look at some of those views on the Santos share price.
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Is the Santos share price a buy?
L1 noted that oil and gas shares rose strongly in March in response to the Iran war, with oil prices jumping by more than 50% and European gas names up between 50% to 70% in the year to date.
The fund manager said that it expects near-term tightness of fuel supply to continue. However, the medium-term fundamentals are "less supportive".
Based on the above, L1 decided to reduce its exposure to energy names during March, including Santos shares, due to the expectation that oil and gas prices (and related shares) would normalise as the current conflict resolves. At the time of writing, there is still no permanent agreement between the US and Iran to allow fuel and other cargo ships through the Strait of Hormuz again.
But, on the positive side of things, L1 noted that Santos continues to "make significant progress on its key growth initiatives, with its Barossa project loading the first LNG cargo at the end of January 2026, and the Pikka project expecting to achieve its first oil in the coming weeks."
The fund manager said that the completion of these significant growth projects will mark the end of a multi-year period of elevated investment and represent an "inflection point" for earnings and dividends going forward.
Other analysts' views on the ASX energy share
Other analysts are also fairly positive on the business right now. According to CMC Invest, there are currently six buy ratings, two hold ratings and a sell rating on the business. However, the average price target of $7.90 only suggests a possible rise of 1% from where it is, at the time of writing.
I can see why L1 may have decided to sell if there's little upside to maintaining the position size it held in Santos shares. Other opportunities could be more attractive. In L1's view, it's good to look at businesses with low price/earnings (P/E) ratios and growing earnings.
