We received a note from a reader on Santos last week:
It’s interesting to note Al wonders if it is a good time to buy on the dip in stock prices for companies like Santos since revenues are up on decreased production.
Probably not.
While it is nice to see increased profit margins on current production- which is declining- the reality of finding new reserves is that a higher cost environment is putting itself in place. Costs have and will continue to increase for seismic, drilling, completion, production, gathering, refining and distribution. Real costs are up in all these areas, inflation is adding to the increases at a faster rate than in twenty years, and competition for services is increasing prices as well, leaving oil companies small and large wondering about the cost of bringing new resources to market.
