Algo Update – Santos Buy Suggestion Up 10%
Our Algo Engine recently triggered buy signal in Santos at $5.60, and with the price action filling the technical gap at $6.10, we’re now comfortable with locking in profits.
Santos
ALGO Update: Keep Santos On Your Radar
Since rejecting Harbor Energy’s takeover bid on may 20th, shares of STO have dropped over 10%, which is inline with the drop in global crude oil prices.
Despite the fall in the share price, CEO Kevin Gallagher has been firm that the company (and shareholders) will be better off and will see the benefits of their $2 billion cost cutting plan over the next few quarters.
Our ALGO engine triggered a buy signal in STO at $5.50 on May 30th.
We see good support in the $5.30 to $5.40 area and would suggest adding to long positions there.
We don’t rule out another offer from Harbor Energy in the $7.00 per share area sometime in the future
Santos
ALGO Buy Signal For Santos
Our ALGO engine triggered a buy signal on STO into yesterday’s ASX close at $5.50.
The “higher low” pattern is referenced to the $4.80 low posted on March 15th.
The share price has dropped over 15% since the company rejected a $6.86 per share takeover offer from Harbour Energy last week.
Since then, there have been internal discussions about a higher takeover price, as well as whether the current management can use their strong balance sheet to increase earnings restore a fully-franked dividend.
Technically, we see solid support near the $5.30 area and initial upside resistance at $6.10
Santos
WTI Crude Oil Retreats From 4-Year High
Over the past three weeks, the price of WTI Crude Oil has rallied over 12% and posted a four-year high at $69.35 in early NY trade last night.
However, WTI closed the session down 1.4% at $67.70 after the US and France announced they were close to reaching a deal to renew the Iran nuclear agreement, and a surprise increase of a million barrels in weekly API inventory data.
It’s worth noting that speculators have amassed a very large net long position in the WTI futures market. As of the April 17th report, the non-commercial net long position stood at 728,000 contracts.
This long exposure is just below the record high of 739,000 contracts set in early February when WTI peaked at $66.30.
Technically, the daily internal momentum indicators for WTI are stretched but not yet overbought.
The deadline for renewing the Iran agreement is May 12th. It’s likely that the ongoing negotiations of that agreement will have a strong influence on the near-term price action of WTI.
From a “cause and effect” perspective, any political hurdles in extending the Iran agreement will see WTI trade higher, while the perception of a successful agreement will likely push WTI lower.
Local shares OSH, STO and WPL have all rallied sharply over the last three weeks and have a strong correlation to crude oil prices.
As such, we urge investors to be cautious of increased volatility in the crude oil market and how it could impact these local oil names.
WTI Crude Oil
Oil Search
Woodside Petroleum
Santos
Harbour Energy Offers $13.5 Billion For Santos
US-based, private equity firm Harbour Energy has raised it’s takeover offer to $13.5 billion for oil and gas producer SANTOS.
This is the third offer since last August and pencils out to $6.50 per share.
The bid represents a 30% premium over last Friday’s closing price of $5.07 per share.
STO was added to our ASX Top 100 Model Portfolio at $4.82 on February 12th.
Santos
Local Oil Names Firm As WTI Extends Recent Gains
West Texas Intermediate (WTI) Crude Oil rose over 3% in NY trade to reach a 7-week high of $65.70.
The boost was a result of EIA data showing US crude stocks unexpectedly fell by 2.6 million barrels, or 0.6%.
For the week, WTI has risen over 5%.
In Monday’s blog, we mentioned our preference to buy local names STO, WPL and OSH.
These three stocks are up over 2% for the week and we still see scope for further upside range extension. Also, all three of these stocks are in our ASX Top 50 Model portfolio.
On the daily charts, the next area of resistance for STO is near the $5.65 level, with support at $4.90.
The chart of OSH shows resistance at $7.70 and support at $7.05
The valuation metrics for WPL are more complex. The share price has under performed the Spot WTI price by 24% since September and is 21% below it’s EPS momentum trend.
At 6.50 X EBITDA, WPL may be the best pick for a move back into the price gap above $29.65.
Santos
Oil Search
Woodside
WTI Rally Lifts Local Oil Names
The price of West Texas Intermediate (WTI) Crude Oil rose 3.5% last week and settled just over $62.00.
This places WTI pretty much in the middle of the $66.80 to $58.00 range we have seen so far this year.
What makes this noteworthy is that last week’s rally coincided with a rally in the USD. In short, the USD vs Crude inverse correlation looks to be diminished for now.
The technical picture in WTI is improving and the next upside target is near the February highs of $63.40.
As a result, shares of STO, WPL and OSH are all up over 1.5% in early trade today.
All three of these stocks are in our ASX Top 50 Model Portfolio and we prefer the long side from current levels.
We’ll update each of these stocks in subsequent postings.
Woodside Petroleum
Oil Search
Santos
The Crude Oil Rally Is Looking Stretched
Since December 1st, the price of WTI Crude Oil has rallied over 14%.
Just in the last 5 days the WTI price has risen 5% from $60.25 to a 3.5 year high today of $63.50.
Recent reductions in crude inventories combined with Geo-political tensions in the Middle-East have support prices.
However, there have been many analyst sceptical that this will be a protracted rally in Crude prices.
This scepticism can be seen in the price action of some of the local oil-based names.
Despite the 5% rise in WTI over the last week, shares of OSH have dropped by 2.5% to $7.90, and the share price of WPL and STO have been consolidating off their recent highs and look to be pointing lower.
We urge caution on the sustainability of the recent run up in Crude prices and would suggest exiting long exposure to WPL, STO and OSH
Woodside
Santos
Oil Search
Santos Takeover Bid 21% Premium
A consortium of energy investors has made an all-cash takeover offer for Santos worth A$11 billion.
Indicative pricing for the bid was expected to be around A$5.30 per share, a 21% premium to Wednesday’s closing price.
Crude Slides Lower On Saudi Comments
Spot Crude Oil prices dropped over 2% after comments from a Saudi official that the November OPEC meeting may not result in an extension to the current production cut agreement.
This announcement comes as the return of supply from Libya and increasing rig counts in the USA have kept prices under pressure.
For the week, the front month November Crude Oil contract fell close to 5%.
Technically, Friday’s settlement at $49.25 is the first close below the 200-day moving average since September 10th, which suggests near-term range extension to the downside.
Our ALGO engine triggered a sell signal in OSH on September 28th at $7.10, and a sell signal in STO on September 26th at $4.20.
These trades have been slow to develop but we maintain our downside targets of $6.30 in OSH and $3.35 in STO
Oil Search
Santos
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