Cost cuts to date and a rebound in the oil price have benefitted Santos, the broker notes, but not by enough to offset debt repayment obligations. The broker suggests more measures are required to shore up the balance sheet.
A three-pronged attack of further cost cuts, more substantial asset sales and a capital raising would do the trick, and given the broker has faith in new management’s resolve, Outperform retained. Target rises to $5.60 from $5.50.
Target price is $5.60.Current Price is $4.20. Difference: $1.40 – (brackets indicate current price is over target). If STO meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges – negative figures indicate an expected loss).