Santos share price falls on Q4 update and FY23 production guidance downgrade

The Santos Ltd (ASX: STO) share price is trading lower on Thursday morning.

At the time of writing, the energy producer’s shares are down 2.5% to $7.17.

Why is the Santos share price falling?

Investors have been hitting the sell button on Thursday following the release of the company’s fourth quarter and full year update.

According to the release, Santos achieved sales revenue of US$1.9 billion during the fourth quarter, bringing its full year revenue to a record of US$7.8 billion. This was up 65% year on year.

Santos also achieved record annual free cash flow of approximately US$3.6 billion, which was more than double the level recorded in 2021.

And while its fourth quarter production was lower quarter on quarter at 25.6 million barrels of oil equivalent (mmboe) due to reduced domestic gas volumes in Western Australia following unplanned maintenance at John Brookes, that couldn’t stop Santos from reporting record annual production of 105.4 mmboe (or 103.2 mmboe including Bayu-Undan volumes on a net PSC entitlement basis).

However, it is worth noting that this was at the very low end of its production guidance range, which may have disappointed the market today and could explain some of the weakness in the Santos share price.

Merger update

A key driver of the company’s growth was of course the merger with Oil Search last year, which boosted its output materially.

In addition, management provided an update on its merger synergies target. It revealed that US$122 million in sustaining annual synergies have been achieved, which is towards the upper end of the US$110 million to US$125 million guidance range.

Outlook

Also potentially weighing on the Santos share price today has been its guidance for FY 2023.

Management advised that 2023 production is now expected to be in the range of 89-96 mmboe, down from its previous guidance of 91-98 mmboe.

This is primarily due to the temporary shutdown of the John Brookes platform in Western Australia extending to around late-January/early-February, combined with a delay in commencement of production from the Spartan field into the second quarter due to the repair works at John Brookes.

Capital expenditure guidance is maintained at approximately US$1,200 million in sustaining capex (including restoration) and approximately US$1,835 million for major projects.

The post Santos share price falls on Q4 update and FY23 production guidance downgrade appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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.

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