Santos Share Price Down, but Results Reveal Strong Cash Flow

At time of writing, the share price of Santos Limited [ASX:STO] is down 0.86%, trading at $6.88.

It has been a solid 12-month period for the stock:

Santos Share Price

Source: tradingview.com

The latest news out of the company is its full-year results, which reveal improved cash flow and growth in reserves.

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Santos share price falls as investors demand more

There were a number of highlights to be drawn from the full-year results which include:

  • Record free cash flow of $1.006 billion, up 63%
  • Record underlying NPAT (net profit after tax) of $727 million, up 129%
  • Record EBITDAX (Earnings before Interest, Taxes, Depreciation, Amortization and Exploration Expense) of $2.16 billion, up 51%
  • Proved and Probable reserves of 1,022 mmboe, raising the reserve replacement ratio by 395%
  • A dividend of 6.2 US cents

The company is now targeting growth in production across its five core assets, as seen below:

Santos Share Price

Source: Santos Limited

One interesting counterpoint to the positive story for the stock is that it expects to reduce its gearing ratio from 33% to less than 30% by the end of 2019.

The company bases this on a $65 per barrel oil price in 2019.

This may be a tad optimistic in light of slowing global growth.

What’s ahead for the Santos share price?

With operations in natural gas and oil, the company’s future is closely tied to the outlook for energy prices.

It is worth noting that there is significant growth projected in LNG demand, particularly in the Asia-Pacific region, as seen in the graph:

Santos Share Price

Source: Woodside Petroleum Limited

In this sense, Santos is well positioned long-term.

That being said however, there is an element of uncertainty around oil prices. They could cut one of two ways depending on whether global growth does eventually slow down in 2019.

Also in the mix is the prospect of a worsening trade war. The share prices of Santos Limited [ASX:STO], Woodside Petroleum Limited [ASX:WPL] and Beach Energy Limited [ASX:BPT], have been hit in the past when negative news comes out.

As a result, it may be wise for shareholders to consider their investment horizon when looking at these stocks.

Regards,

Lachlann Tierney,
For Money Morning

PS: In times of uncertainty, there is frequently increased interest in gold. Read our free report on why gold cold be set for a stellar run. Download it here.

 


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With an MSc from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently, he has been working with Phil Anderson and Terence Duffy. They have three publications:

Phil Anderson’s Time Trader
Cycles, Trends & Forecasts
Money Morning Trader


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