Last year, S&P/ASX 200 Index (INDEXASX: XJO) energy share Santos Ltd (ASX: STO) announced an agreement to purchase the Australian west LNG assets of ConocoPhillips (NYSE: COP). For US$1.39 billion, the company would acquire an estimated ~16% earnings per share accretion in 2020.

But then everything went wrong. Santos has been buffeted on both sides during the past 2 months through no fault of its own. The pandemic has effectively killed off demand while the Saudi-Russian oil price war has created a supply glut. A perfect storm that would have killed off a less well-managed company.

Nevertheless, Santos is well placed to weather this storm. It has used the current crisis to drive a transformative action plan. 

A disciplined ASX energy share

On 23 March 2020, Santos announced a $550 million (38%) reduction in 2020 capital expenditure. Santos also announced a $50 million reduction in 2020 cash production costs and is targeting a free cash break-even point of US$25/bbl. For a large scale capital intensive company, this is an outstanding effort. 

Even with the strains of coronavirus, Santos has produced the highest Cooper Basin gas production in 9 years. The company also generated $265 million of free cash flow in Q1 of CY2020. 

Strong balance sheet

The company is carrying more than US$3 billion in liquidity. This comprises US$1.15 billion in cold hard cash and US$1.9 billion in committed yet undrawn debt facilities.

In a wise tactical move, Santos unloaded a 25% stake in the Darwin LNG facility and the Bayu-Undan gas field to South Korean energy group SK E&S. It also has a letter of intent signed to sell-down a 12.5% interest in Barossa to JERA. This will allow Santos to pay for the ConocoPhillips acquisition in cash and $750 million 2-year debt.

Santos has also managed to sustain consistent pricing amid these turbulent times. The company has ~70% of volumes tied to prices via fixed price domestic gas sales, and oil hedged at an average floor price of US$39/bbl.

Add to this Santos has full control over current capital expenditure decisions with all major capital projects yet to take final investment decisions.

Foolish takeaway

The oil and gas sectors remain the blood of nations. For this reason, they remain the main industry globally to be protected by private armies. Oil and gas are likely to stay that way for the foreseeable future until genuine scalable alternatives emerge in the energy markets.

While the oil price is low now, it will rise again over time. Santos is, in my view, the best-placed ASX energy share to emerge from the pandemic structurally stronger than it was in January 2020. Its share price remains 41% down year-to-date.

More reading

• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday
• Which is the cheapest ASX bank stock on the market?
• 3 ASX 200 shares to buy before the market rebounds

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is Santos the best ASX 200 energy share? appeared first on Motley Fool Australia.

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Due to the market crash this year, the S&P/ASX 200 Index (ASX: XJO) has recorded a 7.5% decline over the last three years.

While this is disappointing, not all shares on the market are down over the period. In fact, some have generated mouth-watering returns over the three years.

Three top ASX 200 shares that are up over 1,000% in three years are listed below:

Afterpay Ltd (ASX: APT)

The Afterpay share price is up a remarkable 1495% over the last three years. The driver of this strong gain has been the success of its buy now pay later offering in the ANZ market and particularly the US market. Over the three years Afterpay has grown its active customer numbers at an extraordinary rate. For example, as of the end of March, Afterpay had 8.4 million active customers. This was up 122% over the 12 months and comprised 3.2 million customers in the ANZ market, 4.4 million customers in the US, and 0.8 million customers in the UK. From these customers the company delivered quarterly underlying sales of $2.6 billion. As a comparison, just under three years earlier on June 30 2017, Afterpay had 840,000 active customers and was generating quarterly underlying sales of $271 million.

Appen Ltd (ASX: APX)

The Appen share price has zoomed 1028% higher since this time in 2017. Investors have been fighting to get hold of the artificial intelligence company’s shares due to its explosive earnings growth. This has been driven by the increasing demand for its data services due to the growing importance of machine learning and artificial intelligence models for big business. Appen is exposed to these growing markets as its million-strong crowd-sourced team prepare the high quality data used in these models. Many of the largest tech companies in the world such as Facebook and Microsoft have been customers during the period.

Polynovo Ltd (ASX: PNV)

The PolyNovo share price is up a massive 1059% during the last three years. The driver of this strong gain has been the enormous promise of the medical device company’s NovoSorb product. It is a dermal scaffold for the regeneration of the skin when lost through extensive surgery or burn. The company is also looking to extend the use of NovoSorb into the hernia device and breast augmentation markets. Combined, these three markets have an addressable opportunity worth an estimated $7.5 billion per year.

More reading

• Is Santos the best ASX 200 energy share?
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday
• Which is the cheapest ASX bank stock on the market?
• 3 ASX 200 shares to buy before the market rebounds

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post These ASX 200 shares are up over 1,000% in just 3 years appeared first on Motley Fool Australia.

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