The Santos Ltd (ASX: STO) share price is trading 1% higher this morning after announcing a record quarterly production of 19.8 million barrels of oil equivalent (mmboe).
Santos is one of Australia’s largest oil and gas companies. Founded in the 1950s, Santos owns and operates one of Australia’s largest portfolios of oil and gas fields, connected by extensive pipelines and complementary facilities.
Record Production
19.8 mmboe was a new record for Santos, constituting a 32% uplift from the same period last year and a 7% uplift from the previous quarter.
The company also recorded record sales volumes of 25.2 mmboe which resulted in sales revenue of $1.03 billion.
Santos posted $214 million in free cash flow for the quarter, bringing free cash flow for the first 9 months of 2019 to $852 million.
Just 3 days ago, the company announced the acquisition of ConocoPhillips‘ natural gas fields in northern Australia for a total of US$1.39 billion. The acquisition will be paid for with existing cash and new bank debt.
Santos labelled the acquisition as value accretive saying that it provided Santos with an interest in low cost natural gas assets along with strategic LNG infrastructure consistent with Santos’ core asset growth strategy.
Commenting on the acquisition, CEO Kevin Gallagher said: “This value accretive acquisition will also further reduce our free cash flow breakeven oil price and strengthen our offshore operating and development expertise to drive growth across northern and Western Australia where we have a significant existing resource position.”
What Now?
Santos has maintained its full-year production guidance of 90-97 mmboe. The share price reacted positively to this morning’s update, with shares up just over 1% at the time of writing.
The Santos share price has had a great run in 2019 to be up more than 40% and I find it hard to justify buying at these levels given the unpredictable nature of the business.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
