3 Things We learnt from Our Catchup with Santos Limited (STO)

Romano Sala Tenna

Katana Asset Management

STO is polarising analysts, fund managers and retail investors alike. Consider recent research notes from 2 of Australia's largest brokers: one with a valuation/price target of $5.50 and the other $13 even! But of course with confusion and uncertainty lies opportunity. So with a sense of opportunity in mind we caught up with the company in Perth today. 3 (important) things that were confirmed: 1. STO believe that infrastructure assets are getting 'very good prices at the moment' and that these assets are 'cheaper to fund in someone else's hands'. Whilst there is a lot of gas to pass through the pipeline, we take this as confirmation that STO's clear preference is to sell this asset. 2. Fairview is a 'world class field'; company forecasts of 1 TJ/day are being well and truly exceeded with production consistently up around 2.3/2.4 TJ/day. 3. A placement remains off the table at the present oil price: STO have many levers to pull, and even at this deflated oil price will be able to generate solid Free Cash Flow (FCF) and begin repaying debt.

Romano  Sala Tenna
Portfolio Manager
Katana Asset Management

Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.

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