The Santos Ltd (ASX: STO) share price has been having a reasonably positive year.
Since the start of 2023, the energy producer's shares have risen 3%.
This leaves the Santos share price currently trading at $7.30.
Where next for the Santos share price?
A recent note out of Citi reveals that its analysts have named Santos as its preferred oil exposure. However, due to its current valuation, it isn't buying right now and would prefer to pick up shares at a cheaper price.
According to the note, the broker has a neutral rating and $7.75 price target on its shares. Based on the current Santos share price, this implies potential upside of 6.1%.
Though it is worth noting that this potential return should be boosted by dividend payments. Citi is forecasting dividends per share of 49 cents in FY 2023 and 40 cents in FY 2024. This equates to yield of 6%+ and 5%+, respectively.
What did the broker say?
Citi believes investors should be keeping their powder dry for the time being. Though, if they are keen to get some exposure to the energy sector, they could consider Worley Ltd (ASX: WOR). The broker explains:
We continue to believe Santos is efficiently priced relative to prevailing uncertainty on delivering projects; the same can't be said of all ASX Energy peers.
Accordingly, STO is our ideal exposure for the vital role of the energy sector in inflation hedging equity portfolios, playing geopolitical tail risks, and the "OPEC put" established sub-$70 oil which provides a scarce source of earnings protection during a broader earnings recession.
However, we continue to view WOR (Buy) as the best energy beta play given incentives tailwinds like US IRA, as opposed to Australian intervention risk for oilers.
