Santos Limited (STO)
BUY

STO - Stock Update

 24 Mar 2022
Sector: Energy

There was a recent announcement of an oil discovery in Pavo-1. (STO has a 70% stake in the Pavo-1 JV). The 2C contingent resource at Pavo-North has been assessed at ~43MMBbl which translates to ~30MMBbl net to Santos.

The market appears to have ignored the announcement from STO/CVN which is confusing particularly due to it being at a time when there is a global focus on oil and shortages because of the crisis in Ukraine.

The benefit for STO is that the Oil could be directly tied into nearby Dorado infrastructure which is only a mere 46km away and also that it materially de-risks the Pavo-North region. Santos base business is expected to be a strong cash generator regardless of the recent announcement, this further supports our investment thesis of a buy rating for STO.

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Company overview

Santos is a leading independent oil and gas producer located in the Asia Pacific region. The STO-OSH merger has demonstrated strength against its competitors. STO has multiple growth options, domestically and internationally, and a very strong track record. The growth opportunities along with the recent announcement on Pavo-1 supports our investment thesis of a Buy rating.

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