3 reasons why Santos Limited is looking forward to earnings gains in the next year

New LNG production to drive revenues.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Oil and gas producer Santos Limited (ASX: STO) is seeing renewed share price strength in the past month. From mid-April, it is up about 7.4% to $14.13 and rising above the downward trend it has been on since September last year.

What is making the market revise its expectations of the company?

1-    Recent announcements about the PNG LNG project reaching completion is a plus, of which the company has a 13.5% stake in it. First exports should be ahead of schedule and start before the middle of this year.

The second LNG processing plant, or "train", is due to start production within the next several weeks.

2-    The Queensland-based GLNG project is more than 80% complete and on schedule for first LNG in 2015. It is a joint venture with three of the largest energy companies in the world – PETRONAS, KOGAS and Total.

It has also entered agreements with both Queensland Gas Company and the Australia Pacific LNG project (APLNG) for more efficient development and transport of gas resources. The two projects' port facilities are near one another and coordinating development will avoid the need to build additional infrastructure. That will help save time and money for Santos.

3-    The company is progressing with its shale oil and gas development in the Cooper Basin, working in part with other producers such as Beach Energy Limited (ASX: BPT) and Senex Energy Ltd (ASX: SXY). Santos has extensive infrastructure in the region that the two other producers can access a relatively short distance from their exploration and development sites.

Gas produced here can be sent on to Queensland as part of the GLNG project resources.

The stock has a dividend yield of 2.2% and a PE of 25.3. Analyst expectations are for a big increase in earnings in 2015 due to the new production from the two LNG projects.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »