Why the Santos (ASX:STO) share price is up 5% in a week

Can the company's shares go higher?

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The Santos Ltd (ASX: STO) share price has been powering ahead over the past few days. This comes as the energy giant released a positive announcement last week, along with a strong recovery in oil prices.

At the time of writing, the company's shares are fetching $6.36, up 1.88%. This means the Santos share price is now up more than 5% in a week.

What's happening with Santos?

Investors have been buying up Santos shares after they traded as low as $5.99 last Thursday.

Santos updated the ASX regarding its merger plans with peer Oil Search Ltd (ASX: OSH) on Friday. It advised the two companies entered into a definitive agreement to combine in an all-scrip transaction.

Oil Search shareholders are set to receive 0.6275 new Santos shares for each Oil Search share held. Upon completion, this would give Oil Search shareholders a 38.5% stake in the newly merged entity. Santos shareholders will retain the remaining 61.5% interest.

The merged group will become the ASX's largest oil and gas company and a top-20 global player. In essence, this would give the super company a diversified portfolio of long-life and low-cost assets with significant growth options.

It is expected the implementation date will occur on 16 December 2021.

Another reason why the Santos share price could be moving higher is the rising price of the West Texas Intermediate (WTI). Last Thursday, the WTI was trading around US$67.91 per barrel. However, this has now surged to US$72.79 per barrel. This represents an increase of about 7% over the week.

Furthermore, a broker note from UBS raised its price target for Santos shares by 1.8% to $8.45. Based on the current share price, this implies an upside of approximately 32% for investors.

Santos share price summary

This year, the Santos share price had mostly been tracking higher until its drop around mid-June. This has led the company's shares to remain relatively unchanged for the 9-month period.

Santos presides a market capitalisation of roughly $13.3 billion, with more than 2 billion shares outstanding.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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