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Santos share price could climb after 20% production target upgrade

Kenneth Hall
oil price increase

The Santos Ltd (ASX: STO) share price will be one to watch today after upgrading its production targets for 2025.

Why could the Santos share price climb higher?

Santos lifted its 2025 production target to 120 million barrels of oil equivalent (mmb0e). That is double Santos’ 2018 output figure and represents a cumulative annual growth rate of 8% through to 2025.

The Aussie energy group had originally set a target of 100 million mmboe back in 2018. The Santos share price could climb higher on the 20% boost to 2019 production numbers and will be worth watching in today’s trade.

CEO and Managing Director Kevin Gallagher said the successful execution of the group’s ‘Transform-Build-Grow’ strategy since 2016 was enabling the strong growth.

Santos’ 2019 forecast free cash flow breakeven oil price is now US$29 per barrel, said Mr Gallagher. To put that in perspective, Brent crude is currently sitting around the $60 per barrel mark. The Santos share price has rocketed 53.41% higher to $8.10 per share this year on the back of strong commodity pricing.

Santos is leveraging existing infrastructure in all 5 of its core assets and has now upgraded its production guidance to reflect that.

This strategy includes expansion across its Barossa LNG and Dorado liquids, as well as PNG LNG expansion, GLNG ramp-up and Cooper Basin production growth.

What else did Santos announce?

Santos narrowed its 2019 production guidance to a 74–76 mmboe range, down from 73–77 mmboe. Sales volume guidance tightened to 93–95 mmboe, down from 90–97 mmboe previously.

The Santos share price could climb higher following the production updates this morning. On top of higher production, the group also reported lower cost guidance numbers to the market.

Santos’ 2019 upstream unit production cost guidance has been lowered to $7.25–7.50 per barrel of oil equivalent (boe), down from $7.25–7.75 per boe.

Santos is expecting to complete its ConocoPhillips acquisition in the first quarter of 2020, subject to the required approvals.

At the completion of its FY20 acquisitions, Santos expects to add 6–7 mmboe to its 2020 production numbers.

The Santos share price could be climbing higher this morning following the positive production update.

The post Santos share price could climb after 20% production target upgrade appeared first on Motley Fool Australia.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019