Santos (STO) News Update

Submitted by Jim Thesiger on 4 June, 2008 - 17:11

Santos (STO) has a 12-month share price target of $26.59 from Australian stockmarket analysts from Citi.

Santos (STO) Investor Seminar (Sydney 3 June 2008)

Emphasis on coal seam gas and LNG:

A major emphasis on Santos coal seam gas assets and LNG was understandable after Petronas recently agreed to pay US$2bn for a 40% share in Santos proposed Gladstone LNG Project. Santos is also a participant in the PNG LNG Project, which recently committed to key front end engineering and design (FEED).

Rising Eastern Australia gas demand and pricing outlook:

Eastern Australian gas demand could more than double in the next ten years. Carbon costs and oil price based LNG pricing will also drive Australian gas prices higher thereby increasing the potential for unconventional gas sources. Fairview is a world class CSG deposit. Will time prove Petronas has paid US$0.58/GJ for Gladstone LNG based on a 2 train 6 mmtpa plant requiring 10,830 PJ?

Santos net LNG target of > 10 mmtpa by 2020 is considered aggresive:

We see reasonable potential to expand Gladstone and PNG LNG, subject to suitable LNG market conditions and proving up sufficient CSG reserves to supply Gladstone. Darwin LNG expansion may also happen, but could also exclude Santos gas. Browse LNG involvement is tied to the result of Ichthys North.

Valuation: NAV $18.30 (unchanged) based on DCF at 10%

Our 12-month share price target is $26.59 (unchanged) and is based on our NAV estimate of $18.30 plus potential projects (including PNG LNG and Gladstone LNG).and exploration upside.