A big thumbs up from investors to Santos’ interim result, resumption of dividends and the $2.9 billion buy of Quadrant Energy.
Santos shares charged higher yesterday, ending the day up more than 11% at $6.98.
That’s the highest the shares have been since January 2015 as Santos came under pressure from the slide in global oil prices.
But after three years of pain, hacking and punishment by disgruntled shareholders, Santos’s P&L account is back in black – paying out its first dividend in two years and has been given a tick by analysts for the cash purchase of Quadrant
Santos reported a first-half net profit of $US104 million, a turnaround from the $US506 million loss this time last year.
This was driven by higher oil and gas prices that powered a 16% jump in revenues to $US1.7 billion for the half.
Profit was also supported by the sell-off of its Asian non-core assets for $US221 million.
The oil and gas company is paying a fully franked dividend of 3.5 US cents.
Santos has justified rejecting the $14.4 billion bid from US private equity group, Harbour Energy – debt is down, cash flows up, costs cut (the rise in global oil and gas prices is a bonus) and the company has had enough cash to make a major deal happen without tapping shareholders.
Santos chief executive Kevin Gallagher said the company’s cost-cutting strategy has it out of the black hole as had the rise in global oil and gas prices in the six months to June.
He said the company’s strong cash flows, up 22% to $US637 million, allowed Santos to cut net debt to $US2.4 billion and pay shareholders the first dividend since 2016.
“We will shortly achieve our net debt reduction target, more than a year ahead of schedule, and therefore have a significantly stronger balance sheet to support our growth strategy,” he said in yesterday’s statement.
The Quadrant takeover will give Santos access to the Dorado oil discovery (Quadrant owns 80%, Carnarvon has the other 20%) with its initial resource of 171 million barrels of oil plus gas and condensates.
Quadrant has also backed the Santos takeover.
“Carnarvon welcomes news of the potential acquisition and the incoming joint venture partner Santos,”Carnarvon said.