Santos Takes a Hit from the Pandemic, Share Price Down (ASX:STO)

ASX-listed energy producer Santos Ltd [ASX:STO] released their 2020 half-year results today.

For the period ending in 30 June 2020, Santos reported a US$289 million (about AU$400 million) loss after tax. That’s quite a difference from the US$388 million in profit it registered this same period last year.

What happened?

Santos has taken quite a hit from the pandemic, which caused oil prices to collapse back in April, when the world went into lockdown and oil demand collapsed.

Oil prices have somewhat recovered since, with Brent trading at around US$45 a barrel, but still lower than the US$70 a barrel from the beginning of the year.

Santos production for the period was 38.5 million barrels of oil equivalent (mmboe), 4% higher than the same period last year. Sales volumes were also up 4% to a half-year record of 46.9 mmboe. Yet the average realised oil price was US$47.93 a barrel, a 34% drop.

The collapse in oil prices meant revenue fell by 16% from 2019, to US$1,668 million, and underlying profit was down by 48% to US$212 million.

Santos had to write down US$756 million of assets before tax after revising oil price assumptions from the pandemic and the resulting fall in demand. The biggest hit from the writedown comes from Santos’ Gladstone LNG project in Queensland.

What could happen next?

Santos isn’t the only energy company struggling with lower oil prices. Earlier this year BP and Royal Dutch Shell also said they were writing down their oil and gas assets.

At time of writing, the Santos share price is down 4.34% to $5.62. Since the beginning of the year Santos’ shares have lost over 32%.

After recording a loss, the company has said they will be paying an interim dividend of 2.1 US cents per share, a decrease from last year’s dividend of six US cents.

Still, with much of the world in lockdown and a slowdown in global growth, we think there are better investments.

For dividend plays check out editor Greg Canavan’s free report ‘Five Dividend Stocks Set to Thrive in the Post-Pandemic Era’ . You can access it here.


Selva Freigedo,
For The Rum Rebellion

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

The Rum Rebellion