Santos (STO) Update

Submitted by Craig Strzelecki on 19 March, 2007 - 20:56

Santos (STO) has an updated Neutral 2 trading recommendation (from Reduce 2) and a price target of $9.66 per share from analyst UBS. The analyst has commented on the company's enquiries regarding potential asset split: There has been recent press (AFR) and market interest about whether value could be unlocked by de-merging / divesting STO's domestic gas assets in Eastern Australia, with STO retaining the WA, NT, plus overseas interests, leaving a potentially high margin - high growth international oil / LNG company. They believe Santos is unlikely to demerge / divest its domestic gas assets. STO is Australia's largest domestic gas producer, and separating the Cooper Basin from the company takes away its core foundation asset base, even though it is broadly acknowledged as being mature and in decline. It would also be hard to separate out Cooper oil and CSG, which are considered attractive to STO. They have updated their Santos share price target to reflect Hides and Darwin (50% risk weighted) LNG upside. They also now assume A$0.48/share for risk weighted Santos exploration upside. Their DCF based STO valuation is unchanged. The analyst's valuation for the company is based on NAV and is $8.47 (DCF @ 10%). Their STO share price target is A$9.66 (prior A$9.34), based on our NAV estimate, plus new potential project developments / expansions.

Santos Limited is listed on the Australian Stock Exchange (ASX) under stock code STO. You can view their investor website here. STO was listed on the ASX on 1 October, 1954. Stephen Gerlach is the chairman of Santos and the managing director is John C Ellice-Flint. The energy company is involved in gas and petroleum exploration and the production, treatment and marketing of natural gas, crude oil, condensate, naphtha and liquid petroleum gas; transportation by pipeline of crude oil. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade STO. Check your charts and good luck with your share trading!