STO - Santos Limited

[notting]

Was shorting it Friday in anticipation of the OPEC meeting which no one was saying could be good.
I couldn't understand why it had showed some very short term strength in the face of oil falling off another cliff, with the bid in the background after the capital raising.
Wasn't that comfortable doing it given it did have a week looking bid on it prior, but hey, guess I was lucky today. Will be watching it closely but if all is quiet and oil does little this ain't going anywhere.

 

[notting]

Was shorting it Friday in anticipation of the OPEC meeting which no one was saying could be good.
I couldn't understand why it had showed some very short term strength in the face of oil falling off another cliff, with the bid in the background after the capital raising.
Wasn't that comfortable doing it given it did have a week looking bid on it prior, but hey, guess I was lucky today. Will be watching it closely but if all is quiet and oil does little this ain't going anywhere.

Cashed it at 3.46 What a couple of days!
This could be a final capitulation, lot of oily people not making money at these levels.
I was wanting to short OSH too but thought the WPL bid would hold it up whilst others fell, wrong, but timing that would have been for illegal trading only!

If oil does miraculously turn. OMG. The Wayne Swans inflation genie :nuts: (worlds best treasurer, you have to be kidding me) will well and truly be out of the bottle.

 

[peter2]

Nice short.
Yesterday's huge price selloff in OSH might have pre-empted today's news that the merger was off.

 

[luutzu]

Cashed it at 3.46 What a couple of days!
This could be a final capitulation, lot of oily people not making money at these levels.
I was wanting to short OSH too but thought the WPL bid would hold it up whilst others fell, wrong, but timing that would have been for illegal trading only!

If oil does miraculously turn. OMG. The Wayne Swans inflation genie :nuts: (worlds best treasurer, you have to be kidding me) will well and truly be out of the bottle.

Nice.

It may drop a lot more Friday given the crash today and more shares available by then.

May pick up some more if it does... eventually may buy these suckers for nothing, haha.

Maybe it's just me but there's definitely market manipulation going on. What with pressuring the price down to buy the rights for cheap. Pretty clever, and legal too, apparently.

 

[JTLP]

Casting all that you know aside, when does this (amongst other oilers) become very cheap, with cash, and a takeover opportunity?

Calls for oil to hit $20/bbl (sitting about $30 now), China slowdown, stockpiles building; however I can't shake the feeling if you were to get in now, ride it out for a year you'd be much better placed?

Or perhaps I'm bonkers and I'd do more of my dough

 

[oldblue]

Casting all that you know aside, when does this (amongst other oilers) become very cheap, with cash, and a takeover opportunity?

Calls for oil to hit $20/bbl (sitting about $30 now), China slowdown, stockpiles building; however I can't shake the feeling if you were to get in now, ride it out for a year you'd be much better placed?

Or perhaps I'm bonkers and I'd do more of my dough

I guess the risk is, if oil does hit $20, the STO shareprice will fall well below today's level and some opportunistic offer will take everybody out for peanuts. I don't care much for peanuts!

 

[luutzu]

I guess the risk is, if oil does hit $20, the STO shareprice will fall well below today's level and some opportunistic offer will take everybody out for peanuts. I don't care much for peanuts!

STO is a sitting duck right now.

Sceptre might come back, offer the same $6.88 a share and take all them new $2.5B worth of cash for the same offer. Or others might play it smarter and offer, say $7 and pop goes long term investors' value.

Use some of the cash not yet paid off to grease and oil the Board with golden parachutes and the little shareholders who have been buying at $7 or above are all stuffed.

But I think the Board has been pretty clever. I know, what?

I like how they are not selling STO to private equity for cheap, but chose to sell it to existing shareholders to raise the cash to get through this cluster... mm... That and from the little that I have look into, I think it's smart not to contract their oil/gas out at current low prices, like ORG did... but to buy it from AGL etc. That's long term thinking and not az covering.

---

An aside... if we think that 1.5M/b a day oversupply is a glut, what would a 1.5M under supply mean? Saw chart of that same scenario actually happening in 2010-2013 and it mean $140/b oil that's what.

OPEC and the big oil producers are playing games. Destroying rival producers, geo-political foes, pick up small players on the cheap, get rid of alternative sources and investment in it for a while, keep consumer addicted like drug dealers do... and karching, and also karboom.

 

[skc]

Sceptre might come back, offer the same $6.88 a share and take all them new $2.5B worth of cash for the same offer. Or others might play it smarter and offer, say $7 and pop goes long term investors' value.

That means $6.88 x 1.765B shares = $12.14B. Compared to the previous attempt @ $7.14B for the company.

I'd be surprised if they have increased STO's valuation by 35% all of a sudden.

 

[luutzu]

That means $6.88 x 1.765B shares = $12.14B. Compared to the previous attempt @ $7.14B for the company.

I'd be surprised if they have increased STO's valuation by 35% all of a sudden.

Why not? They're capitalists and wouldn't think of buying things for a steal.

It's not out of nowhere... STO just added $2.5B to the piggy bank. But yes, oil has also gone down since, and that real $2.5B at the bank is taken out to cover the current volatility and paper losses.

But ey, that's why I'm averaging down. In case they make an offer and take my lunch away

 

[UMike]

Why not? They're capitalists and wouldn't think of buying things for a steal.

It's not out of nowhere... STO just added $2.5B to the piggy bank. But yes, oil has also gone down since, and that real $2.5B at the bank is taken out to cover the current volatility and paper losses.

But ey, that's why I'm averaging down. In case they make an offer and take my lunch away

They also added 35% more shares @ ~$3.85.

So the $6.88 a share isn't comparing apples for apples anymore.

 

[luutzu]

They also added 35% more shares @ ~$3.85.

So the $6.88 a share isn't comparing apples for apples anymore.

I know what you're saying, and it's true.

But way I see it is STO has book value, from memory, of around $10B before the CR. Just raised $2.5B so that's $12.5B as far as I'm concerned.

So going by SKC figure of $12.14B if at $6.88 with current 1.7B shares outstanding sounds about right to me.

Of course I'm dreaming but if I own the entire company I wouldn't sell it for less than that.

Oil price crashing so it's booked as "impaired" on the balance sheet... but not really impaired, and not to the extend the market price it at.

I mean it still averages, what $AUD66 per barrel last quarter? It'll average much less next half... but thing is, Santos don't just sell at the price that's quoted... it also buy other people's oil, for cheap, and keep its own underground. So overall might not be such a big loss.

----

Santos was just unlucky - making a couple major big investments then have the prices collapsing on them. I doubt many could have predicted this kind of washout. But with the new cash paying down debt and the second train coming online soon, much much less capex as the major milestones are completed. All we need is reasonable oil and it won't be so bad.

I can wait a couple more years til the oil get up again. But it'll probably be taken over by then.

 

[So_Cynical]

Santos was just unlucky - making a couple major big investments then have the prices collapsing on them. I doubt many could have predicted this kind of washout.

It was stupid not to at least hedge their exposure, many ways to do that including a large CR back before the POO collapse, unlucky and a little stupid to be fair.

 

[luutzu]

It was stupid not to at least hedge their exposure, many ways to do that including a large CR back before the POO collapse, unlucky and a little stupid to be fair.

Can't argue with that. But the CEO is on the way out for that mistake.

Though maybe they were too deep into it and see that there is no way oil could collapse as it has so why hedge. Shouldn't be too gung ho and lose the lot though.

I just did some maths again and when GLNG is fully operational, its annul 7.8 million tonnes capacity is equivalent to 69M barrel of oil. Santos currently produces 57Mbarrel - most likely would only be 54M if we take GLNG out of equation. [I think my maths is right]

So in next 6 months its second train will go online and soon after running at full capacity and in FY17 will see its production doubling.

This might seem a bad thing what with the glut and things, but if I am right, and of course I am ... the IEA also agree with me, haha... that 2017 will see the glut all dried up.

Might work out well.

 

[Ketts14]

STO- Santos Limited

Contemplating buying Santos shares while they are at a low.

Hoping to get some thoughts on the way people may be thinking the company will be headed and thoughts on future oil prices.

Thanks

 

[jbocker]

Re: STO- Santos Limited

Contemplating buying Santos shares while they are at a low.

Hoping to get some thoughts on the way people may be thinking the company will be headed and thoughts on future oil prices.

Thanks

Hi Ketts14. No one can advise and my own thoughts on STO have proved quite wrong over the last 6 months, having bought a few.
What is interesting to me is the report due out this month and what the new CEO will do, firstly with the board and the rest of the company. I would guess there will be a few board members out the door over the next several months, along with a few retiring. I think I recall while in his former CEO position at Clough that company was taken over.
Trimming up costs will only make the company more profitable when the oil price inevitably rises, however in the meantime they are probably a good target for a cashbox company (would govt gives permission?), or at least some of their new gas assets would be of interest.

 

[Ketts14]

Thanks Jbocker,
Ive read through the latest threads and its definetly given me more to think about that I hadn't previously considered.

 

[sparhawk]

hey guys. i'm quite new to the forum, and having bought into STO about 2 weeks ago, thought i'd add some food for thought here. i can't see how they'd fare too bad if you were to buy in soon for a longer haul, as no one could have predicted OPEC to ramp up production as much as they did. sooner or later, even OPEC won't have a choice than to downsize their production as they'll price even themselves out of business. something suspicious of their decision considering they said for years we were running out of that commodity, and it's amusing they did it around the time Iran was coming off sanctions, and the Syria issue heated up alot.

in truth though, i can't foresee how long the glut will remain though, and anyone that could get a bargain at lower prices would gain a good increase IMO. of course, all this hinges on no extra bad news, which seems to be everywhere right now.

 

[oldblue]

it's amusing they did it around the time Iran was coming off sanctions, and the Syria issue heated up alot.

I don't think it's any secret that the Saudis in particular are looking to maintain their market share by squeezing the higher costs producers, especially the US shale producers.

Too much uncertainty for my taste!

 

[shouldaindex]

I'm not sure if anyone else believes this, but I think alot of investing concepts are a complete myth.

If you lived next door to an industrial property and they were involved in gas and oil, and they had $6b worth of debt and required commodity prices to double to break even, and they had a for sale sign on their fence and you saw their for sale price had gone from $15 down to $2 - You would not spend a single cent on them and consider them dodgy as hell.

Yet when we're behind a computer seeing 3 Letters with a number next to it, we attach our real life financial futures to that company selecting the ability to predict oil prices as the sole criteria out of the near infinate criteria available in the world to invest money in.

 

[luutzu]

I'm not sure if anyone else believes this, but I think alot of investing concepts are a complete myth.

If you lived next door to an industrial property and they were involved in gas and oil, and they had $6b worth of debt and required commodity prices to double to break even, and they had a for sale sign on their fence and you saw their for sale price had gone from $15 down to $2 - You would not spend a single cent on them and consider them dodgy as hell.

Yet when we're behind a computer seeing 3 Letters with a number next to it, we attach our real life financial futures to that company selecting the ability to predict oil prices as the sole criteria out of the near infinate criteria available in the world to invest money in.

But thing with oil is it won't remain at this low prices for too much longer. The only reason/s its so low is because it's oversupplied by 1.5% of current demand.

And it's oversupplied because, for various reasons, OPEC keep pumping it as never before. Santos has oil/gas that would take least another 20 years to extract... don't think OPEC and others can keep oversupplying at current rate or afford to hurt themselves for that long.

Simple math is Santo's 30% stake in GLNG is around $8B invested. Its current market price is less than just that one project.

More complicated maths is over the next few decades, the price it could sell its gas and oil will be much more higher than it is now... and that higher rate, when it happens, will mean it is currently underpriced by the market.

Problem is some smart and well oiled group might take it over at slightly above its current price and we're all stuffed. But my thinking is mgt will at least fight for current book value and there may be some takeover battles between a few giants. Maybe that's just wishful thinking but yea... win some lose some I guess.