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Santos share price surges even as Q1 production and sales fall

As oil prices remain incredibly volatile, we examine the details behind Santos’s latest quarterly production results.

Oil markets continue to trade wildly

While oil market volatility has eased off somewhat in the last 24 hours – with Brent and WTI coming off their recent lows – the overall outlook for the world’s most important commodity remains one marred by uncertainty.

Illustrating this point, at the time of writing, WTI’s June Nymex futures contract had risen $1.96, or 14.22%, to $15.74 a barrel.

Similarly, Brent’s June ICE futures contract was up $2.38, or 11.65%, to $22.75 a barrel.

With this in mind, below we unpack some of the key figures from Santos’s latest production results, released to the market this morning.

Santos share price climbs higher on Thursday

Overall, Santos reported lower production and sales revenue for the March quarter, while noted that capital expenditure came in higher.

As part of these latest production results – Santos reported that its Q1 production figures came in 17.9 million barrels of oil equivalent – representing a year-over-year decline of 4%.

As a result of this, the firm's sales revenue also came in lower, with Santos recording Q1 sales revenue of $883 million – representing a decrease of 14% on the prior corresponding period.

'The COVID-19 crisis continues to put demand pressure on industries across the globe and we are not immune. I remain confident our disciplined, low-cost operating model is built to see Santos through these challenging periods,' said firm's managing director and chief executive Kevin Gallagher.

Indeed, though Q1 sales came in lower, the energy giant reassured investors that its liquidity position remain strong – with the company continuing to generate impressive levels free cash flow (FCF), recording Q1 FCF of $265 million.

Santos noted that it had over $3 billion in total liquidity available at the end of the March quarter – made up of $1.15 billion in cash and $1.9 billion worth of undrawn debt facilities.

Speaking to the firm’s risk management strategies, it was flagged that the energy giant currently has 14.2 million barrels of oil hedged at an average floor price of $39 per barrel.

'For 4.6 million barrels, there is also the ability to re-participate at an oil price greater than $77 per barrel due to their three-way collar structure,’ the company also noted.

Interestingly, when Oil Search (ASX: OSH) reported their quarterly production results earlier this week, it was revealed that the company had not undertaken any hedging during the quarter and overall ‘remains unhedged’.

The Santos (STO) share price finished out today’s session up 27 cents or 6.77%, to $4.26 per share.

How to trade oil markets: long and short

What do you make of the current situation: do you see bullish or bearish opportunities? Whatever your opinion, you can trade energy equities like Santos as well as WTI spot and futures – long or short – through IG’s easy to use trading platform now.

For example, to buy (long) or sell (short) WTI spot using CFDs, follow these easy steps:

  • Create an IG trading account or log in to your existing account
  • Enter ‘Oil - US Crude' in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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