Santos has faced a downgrade from broker Jarden to an underweight rating, a shift from its previous overweight rating. This decision follows Abu Dhabi National Oil Co’s (ADNOC) withdrawal of its $36 billion takeover offer for the oil and gas producer. Santos is the second-largest oil and gas producer in the country, focusing on exploration, production, and marketing of natural resources. ADNOC, through its foreign investment arm XRG, announced its withdrawal just two days before the deadline for a binding agreement.
Jarden analysts have indicated anticipated weakness in Santos’ share price following the collapse of the $8.42 per share indicative offer. Consequently, the broker has significantly reduced its 12-month price target for the stock by 16 per cent, adjusting it to $7.05 from the previous $8.40. The prior target had already factored in the potential for the takeover bid to materialise.
The analysts noted that Santos had been trading at a substantial discount, with a closing price of $7.65 on September 17th. They also stated that their underlying valuation of the company, based on a Brent crude price of $US70 per barrel, stands at $7.05, and at $US65 per barrel, it stands at $6.39.
Jarden anticipates a period of market adjustment as investors digest the news. Attention will likely refocus on Santos’ continued presence on the ASX, with shareholders potentially questioning management about the circumstances surrounding the failed deal and the company’s future direction.
