Santos Ltd

STO: XASX (AUS)

Morningstar Rating for Stocks	Fair Value	Economic Moat	Capital Allocation
	A$58.60	Vlpn	Mbmtcnpx

No-Moat Santos Reassures Shell-Shocked Market on Expenditure, Costs and Debt. No Change to AUD 10.30

Mark Taylor

Mar 23, 2020

We make no change to our AUD 10.30 fair value estimate. Santos has not unexpectedly cut 2020 expenditure guidance, including exploration, by USD 550 million or 38% to USD 900 million. And it has further cut the 2020 cash production cost estimate by USD 50 million. It says the target free cash flow break-even Brent price for 2020 is now USD 25 per barrel. While sharply reduced, this is still higher than the USD 20.50 per barrel we estimated in our oil and gas company note of March 10. However, our estimate assumed a survival setting with no growth capital expenditure.

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