After UBS takes into account the flow-on impact from higher European energy prices as a result of the Ukranian conflict, Santos remains the most preferred Australian energy exposure.
The analyst points to valuation upside thanks to around 80% of the company’s share of Barossa gas being sold via a long-term contract indexed to Asian spot LNG prices.
The broker also sees a number of positive catalysts including the selling down of equity in PNG LNG and Dorado/Alaskan oil assets.
The Buy rating and $8.90 target are retained.
Sector: Energy.
Target price is $8.90.Current Price is $7.76. Difference: $1.14 – (brackets indicate current price is over target). If STO meets the UBS target it will return approximately 13% (excluding dividends, fees and charges – negative figures indicate an expected loss).
