Embattled oil and gas major Santos Ltd (ASX: STO) has been in the headlines for all the wrong reasons recently – massive debt, low cash flow, rumoured asset sales/capital raisings and more.
However, the departure of the first shipment from its massive Gladstone Liquefied Natural Gas (GLNG) project today will give shareholders something to smile about, bringing in much needed cash flow.
Managing Director David Knox reported that the project came in on time and within budget, and the $15 billion dollar project could be a game-changer for Santos.
Whether the company will earn decent returns on its investment (given that gas prices aren't as high as anticipated when the project commenced) remains to be seen, but the additional cash-flow will help Santos keep its mountain of debt at bay.
Furthermore a second LNG train will come online in the second quarter of 2016, which should double the production rate to a total of 7.8 million tonnes of LNG per year.
Other oil and gas majors Origin Energy Ltd (ASX: ORG) and Woodside Petroleum Limited (ASX: WPL) are working on their own mega-projects, with Origin's APLNG nearing completion and Woodside's Browse FLNG project still on the drawing board. While today's announcement won't necessarily be a game-changer for Santos it provides a little extra surety for investors.
The oil and gas sector as a whole remains quite unpredictable however, and would be buyers should do their research before investing in Santos.
