The Santos Ltd (ASX: STO) share price has spent most of Thursday morning trading in the red.
Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas stock closed yesterday trading for $7.65. At the time of writing, shares are hovering just below the opening price, changing hands for $7.64 apiece.
This follows the release of the company’s quarterly update for the three months to 30 June (Q2 2023).
What are ASX 200 investors considering today?
The Santos share price is wobbling after the energy stock reported a drop in quarterly sales revenue to US$1.3 billion. That’s down from US$1.6 billion in Q1.
Santos pointed to lower LNG sales volumes and lower commodity prices for all its products for the quarter-on-quarter drop in sales revenue.
Still, it was a relatively strong three months for the company, with Q2 production of 22.8 million barrels of oil equivalent (mmboe). That’s up from 22.2 mmboe in Q1, mostly driven by increased domestic gas volumes in Western Australia.
Santos had free cash flow of around US$400 million in the quarter.
Q2 also saw Santos complete its US$700 million buyback program.
As for the offshore Barossa project, the company said that’s 66% complete, excluding the Darwin Pipeline Duplication project. Santos and its Japanese and Korean joint venture partners at Barossa, JERA and SK Group, have suspended drilling.
The partners are waiting for assessment and acceptance of the environmental plan by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
Santos hopes to recommence drilling before the end of the year. That would keep the project on schedule for first production in 2025. A feat that would likely offer some heady tailwinds for the Santos share price.
As of 30 June, Santos had net debt of $4.1 billion and gearing at 21.9%.
What did management say?
Commenting on the results that are seeing the Santos share price seeking direction today, CEO Kevin Gallagher pointed out that the business “continued to perform well in a volatile oil price environment”.
“Free cash flow of more than US$1.1 billion in the first half positions the company well to deliver shareholder returns, backfill and sustain our existing business while also investing in our decarbonisation projects,” he said.
Addressing Santos’ carbon capture and storage (CCS) ambitions, Gallagher added:
We were also pleased to see positive momentum for our Bayu-Undan CCS project.
The Australian government introduced legislation to the parliament to implement the London Protocol’s cross-border provisions for CO2 transport and storage, and the Timor-Leste government included approval of the necessary legislation and regulation to allow carbon capture and storage activity in the five year legislative program for its new national parliament.
These are key regulatory milestones to enable Bayu-Undan CCS.
What now for the Santos share price?
Looking to what could impact the Santos share price ahead, the company’s production volume guidance range narrowed to 89 to 93 mmboe from the prior 89 to 96 mmboe.
Sales volume guidance remained unchanged.
And guidance for capital expenditure for major projects in 2023 was reduced from around $1.8 billion to a range of $1.5 to $1.6 billion.
Santos will release its half-year results on 23 August.
Santos share price snapshot
The Santos share price has outpaced the benchmark so far in 2023, up 8% since the opening bell on 3 January.
