Oil & gas major Santos Ltd (ASX: STO) is feeling the squeeze from plummeting crude prices with revenue in the June quarter falling 19% from the same time last year to $786 million.
Shares in Santos dropped 1% to $7.64, compared to the 0.3% increase in the S&P/ASX 200 Energy Index (Index: ^AXEJ) (ASX: XEJ).
The drop in quarterly revenue was primarily due to the lower oil price with the average condensate price falling 34.5% over the same corresponding period to $US61.15 a barrel.
However, the result would have been worse if not for the lower Australian dollar, higher gas price and a 12% increase in production.
Management has also slashed capital expenditure to $336 million from $1.04 billion over the period as it tries to stave off a capital raising in the face of prolonged weakness in the oil price and a potential downgrade in its credit rating.
Asset sales are also an option if Santos needed to bolster its balance sheet as it looks to start producing liquefied natural gas from its $US18.5 billion GLNG project in the September quarter.
Management has maintained its 2015 (its financial year is the same as the calendar year) production forecast of 57 million barrels of oil equivalent (Mmboe) to 64 million Mmboe at a cost of between $14.20 and $14.60 per barrel of oil equivalent (boe).
Santos is forecasting capital expenditure, including exploration and evaluation, of $2 billion for 2015 and it will report its half year result on August 21.
Santos isn't alone in having to weather the impact of weak oil prices as Woodside Petroleum Limited's (ASX: WPL) quarterly result also shows.
However, Santos is the most impacted by the fluctuating oil price among the major ASX-listed energy stocks, due in part to its stretched balance sheet.
While Santos has the most upside if the oil price recovers, buying Woodside Petroleum and Oil Search Limited (ASX: OSH) allows me to sleep better at night.
As a point of interest, crude oil prices tend to rise at the end of the calendar year and into the new year. Given the big plunge in the oil price, I suspect we will see this seasonal pattern emerge this year, which will bode well for Santos – assuming the oil price doesn't slide further in the meantime.
But if you are looking for stocks that aren't at the mercy of volatile commodity prices and with big upside potential, sign up below to get your free report on the best small cap stocks to own for 2015-16.
