Why is the Santos share price lifting on Tuesday?

The Santos Ltd (ASX: STO) share price is in the green in early trading.

The S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $7.07 per share. Shares are currently changing hands for $7.15 apiece, up 1.13%.

That’s right about in line with the 1.31% gains posted by the S&P/ASX 200 Energy Index (ASX: XEJ) at this same time.

Here’s what ASX 200 investors are considering on Tuesday.

Why is the Santos share price lifting?

The Santos share price is lifting today despite the company announcing it anticipates an impairment of US$147 million as a result of the Spar/Halyard reserves reduction in Western Australia.

The 26 million barrels of oil equivalent (mmboe) reduction was largely due to earlier than expected water ingress at the Spar/Halyard field.

Santos also announced other impairment charges of US$181 million related to other late-life producing and exploration assets. That brings the total impairment to US$328 million (AU$470 million).

The impairment charges won’t impact the company’s underlying earnings.

On the positive side, and likely responsible for helping lift the Santos share price today, the company reported its proved plus probable (2P) reserves increased by 171 million barrels of oil equivalent (mmboe) before production to 1,745 mmboe.

The annual 2P reserves replacement ratio (RRR) was 166% and the three-year RRR was 366%.

The biggest increase in reserves came from Alaska, with 165 mmboe added following the sanction of the Pikka Phase 1 project.

Reserves were also added in Papua New Guinea, Queensland, and the Cooper Basin before production.

Commenting on those results, Santos CEO, Kevin Gallagher said, “Today’s statement is the result of Santos’ disciplined annual reserves review and accounting processes, which include external audit of approximately 97% of total 2P reserves.”

Offshore Dorado project greenlighted

In a separate announcement offering tailwinds for the Santos share price today, the company reported the National Offshore Petroleum Safety and Environmental Management Authority had accepted its the Offshore Project Proposal (OPP) for Dorado, a proposed phased liquids and gas development.

“Our focus now is to finalise the concept for an integrated liquids and gas development and obtain the remaining approvals required to support a final investment decision,” Gallagher said.

He added:

Dorado will provide a welcome boost to Australia’s energy security, while the potential subsequent gas development provides a future source of supply for Western Australia’s domestic market and LNG projects.

The best emergency reserve you can have for national liquid fuel security is oil in the ground and the infrastructure in place to produce it when you need it most.

Santos has an 80% interest in Dorado. Carnarvon Energy Ltd (ASX: CVN) holds the other 20%.

Santos share price snapshot

As you can see in the chart below, the Santos share price is trading right about where it kicked off 2023. Longer term, shares in the ASX 200 energy giant are up 41% over five years.

The post Why is the Santos share price lifting on Tuesday? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Even Joe Biden sees a lengthy future for ASX 200 oil stocks
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Thursday
• These are the best ASX 200 energy shares to buy now: Morgans

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.

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