Santos dropped over 5% after reporting results on Friday morning; clearly a surprise to the market, but not to Katana Asset Management. We spoke with Portfolio Manager Romano Sala Tenna about the results. While the results were in line with their expectations, he said he expected the size of the impairments could be a surprise, particularly to ‘mum & dad’ investors. Unlike Woodside Petroleum, the current oil price means Santos is cashflow-negative. “On our metrics, if we don’t see a solid rebound in the oil price in the next 12 months, we think Santos will struggle to reduce its debt profile.” While company figures may imply that they’re cashflow positive at $32US per barrel, this includes about $600m of asset sales in FY16. If you account for the sales, the true cashflow breakeven price is around $42US per barrel. On the plus side, there were no reserves written down at GLNG showing this key asset is still operating as expected, Fairview and Roma are producing above budget, and costs have come down dramatically.