Things have certainly changed for Santos. At the end of May, the share price fell to $5.58 after it rejected a multi-billion dollar takeover offer from Harbour Energy of the US.
Nearly four months later the shares have rebounded to near five-year highs around $7.30 this week thanks to the surge in global oil prices and growing investor confidence the company can deliver on promises made in seeing off the unwanted bidder. The shares ended at $7.25 yesterday, down by just over 1% on the day.
Santos shares are up more than 33% this year, topping the 28% advance in the price of Brent crude futures – the key global oil price.
At an investor day yesterday it was a more confident and upbeat Santos management restating previously revealed ambitions to double its gas output and targeting a production rate of more than 100 million barrels of oil equivalent by 2025.
This expansion is driven in part by Santos $US2.2 billion takeover of unlisted WA oil and gas group, Quadrant Energy last month.
Quadrant is domestic gas supply contracts in WA, plus a series of prospective oil plays led by the highly prospective Dorado oil wells off the Northern coast of WA.
“Subject to regulatory approvals, the recently announced acquisition of Quadrant Energy will further reduce our breakeven oil price and deliver operatorship of a high-quality portfolio of low-cost, long-life conventional Western Australian natural gas assets, CEO Kevin Gallagher said yesterday.
“It would also give us a leading position in the highly prospective Bedout Basin, including the recent significant oil discovery at Dorado.
“We are now positioned for disciplined growth leveraging existing infrastructure in all five of our assets in the portfolio and are targeting production of more than 100 mmboe by 2025.”
Mr. Gallagher yesterday the company has already tightened its operations to get the company above that 100 mmboe mark.
“Our industry has got a habit of blowing itself up during growth modes but we’ve put in disciplined models to make sure we don’t drop the ball,” Mr. Gallagher told the investor day function
“The Quadrant acquisition helps us get the balance right. It’s a balance between natural gas and liquids.”
The company said it is also using solar and renewable energy technology to power its operations instead of gas, providing additional gas for sale.
During the presentation on Wednesday, Santos revealed it had rearranged its five core pillars for operation, downgrading the controversial NSW Narrabri coal seam gas project from a core focus to under a broader Queensland and NSW grouping, and announcing the West Australian Quadrant assets as a stand-alone core pillar.
In fact, analysts and media at the conference said Mr. Gallagher did not mention the Narrabri CSG project, although he noted it as an additional growth opportunity.
During the investor meeting, Santos reaffirmed its commitment to supplying gas to the domestic market, supplying about 13% of the east coast gas demand.
Mr. Gallagher said as the company was able to meet drive down debt sooner than expected due in part takeover play for Quadrant Energy.
The company is also targeting a 3.5 US cents per share interim dividend.
