With oil prices falling, should I still buy Santos shares now?

Santos Ltd (ASX: STO) shares are pushing higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $7.30. As we eye the Tuesday lunch hour, shares are swapping hands for $7.33 apiece, up 0.4%.

For some context, the ASX 200 is just about flat at this same time.

Taking a step back, Santos shares have gained 19.4% in 2026, smashing the 1.1% year-to-date gains posted by the benchmark index.

And that’s not including the 14.5 cents per share in unfranked dividends Santos paid out to eligible stockholders on 25 March. If we add that back into the current share price, the stock’s cumulative value has risen 21.6% this year.

Santos trades on a 4.8% partly-franked trailing dividend yield.

One of the bigger tailwinds for the Aussie energy giant has been the surging oil price. Currently trading for US$78 per barrel, the Brent crude oil price is up 28% since 1 January

As you’re likely aware, global oil and gas prices have been spurred by the conflict in the Middle East and resultant closure of the vital Strait of Hormuz shipping lane.

But with global oil prices coming off the boil – the Brent crude oil price is down more than 34% since 29 April – is Santos still a good buy today?

Santos shares: Buy, hold, or sell?

Peak Asset Management’s Niv Dagan recently analysed the outlook for Santos’ outperforming stock (courtesy of The Bull).

“Santos is a global energy company,” he said. “Much of the near-term upside depends on successful execution of major projects.”

Commenting on those projects, Dagan noted, “Barossa is online and ramping up, while the Pikka phase 1 in Alaska has started production, with both expected to materially increase free cash flow at plateau rates.”

Dagan added that the ASX 200 energy stock is also aiming to materially deleverage over the next three to four years.

“Management is also targeting at least 60% of free cash flow for shareholder returns and a $2.5 billion reduction in net debt by 2030,” he said.

Summarising his hold recommendation on Santos shares, Dagan concluded:

However, the investment case still relies on commodity prices, capital discipline and the delivery of a large multi-year development pipeline across Australia, Papua New Guinea and Alaska.

What’s the latest from the ASX 200 oil and gas stock?

Santos shares may be getting a lift today, with the company announcing this morning that it has commenced continuous production operations at the Pikka Phase 1 oil project in Alaska.

Commenting on the milestone, Santos CEO Kevin Gallagher said:

The first production wells are now online and delivering continuous production. We will commence pressure support through seawater injection and bring more wells online progressively, building production toward our plateau target of approximately 80,000 barrels per day in the third quarter of this year.

The post With oil prices falling, should I still buy Santos shares now? appeared first on The Motley Fool Australia.

More reading

• The US-Iran peace deal just wavered. Here is what this means for these ASX shares
• 5 things to watch on the ASX 200 on Tuesday
• Buy, hold, sell: JB Hi-Fi, Westpac, Santos shares
• 5 things to watch on the ASX 200 on Monday
• Brokers name 3 ASX shares to buy right now

Motley Fool contributor Bernd Struben 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 Scott Phillips.