Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Santos (ASX:STO) shares open lower on positive HY21 results

Santos Limited (ASX: STO) shares faced an uphill battle after the pandemic last year. However, HY21 results suggest Santos shares are on track to reach former highs.

Santos Limited (ASX: STO) shares faced an uphill battle after the pandemic last year. However, HY21 results suggest Santos shares are on track to reach former highs.

Santos Ltd (ASX:STO) is one of Australia’s largest oil and gas companies, competing with  Woodside Petroleum Ltd (ASX: WPL) and others.

STO share price

Source: Rask Media STO 2-year share price chart

HY21 sets records

Santos released its HY21 results with Olympic breaking records, reporting record production and sales as depicted below.

Source: STO HY21 report ($US million)

The ramp-up in demand for liquified natural gas (LNG) produced in the Bayu-Undan/Darwin project primarily drove the rise in sales. Higher oil prices also played a key role in these results.

As a result, sales revenue soared by 22% from HY20 to HY21.

This ultimately led to a staggering turnaround in net profit after tax from -$US289 million to $US354 million. However, improvement in revenue was not the only contributor.

Santos’ bottom line received a major boost from a revaluation of its non-current assets.

Santos relies on its non-current assets like plant and equipment to produce LNG. The long-term value of these assets is reassessed on their expected future cash flow estimation.

In HY20, Santos had to revalue these assets downwards significantly due to the pandemic and uncertainty around future cash flow generation. However, conditions have improved since then as Santos uses more optimistic estimates of future oil prices and discount rates.

So, rather than a downward revaluation of -$US756 million in HY20, it only needed to take a -$US8 million hit. This is a big improvement of $US748 million.

The big jump in net profit after tax resulted in Santos distributing an interim dividend of US5.5 cents per share compared to US2.1 cents per share in HY20.

Is Santos a Mentos?

The favourable oil prices and market conditions seem like a breath of fresh mentos. However, don’t let it get stuck in your teeth.

These conditions tend to flip at any time and are outside of Santos’ control. The volatile nature of Santos’ revenue below speaks to this.

Source: TIKR

Given the erratic movement in sales dictated by external market forces, it’s a company I tend to steer away from. Another reason is that it falls outside of my circle of competence.

On the other side of the fence, if you have some sort of informational or analytical edge, Santos may be a sound investment due to its size and scale.

If you are strongly considering Santos, bear in mind that the more factors a business relies on, it becomes harder to forecast.

If you want to become a better investor, I’d recommend signing up free Rask account and accessing our full stock reports. Click this link to join for free and access all of our free analyst reports.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned
Skip to content