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.
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
The recent rally in Crude Oil reversed overnight as November futures fell close to 3% after OPEC output rose by 120,000 barrels per day during the month of September.
US drilling firms also added rigs for the first time since August, which suggests more supply coming online into the end of the year.
As a result, shares of local oil producers STO, OSH and WPL are all priced lower in early trade.
Our ALGO engine triggered a sell signal in OSH on September 28th at $7.10. If Crude Oil extends its correction lower, we would look for the next key support level near the September 9th low at $6.50.
A sell signal for STO was generated on September 26th at $4.20, which is developing slowly with a downside target near the August 18th low of $3.35.
We didn’t get a sell signal in WPL, however, we would expect a break of the $29.00 level would extend down to the $28.30 level in the near-term.
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Santos
Woodside Petroleumosh
With the recent hurricane activity near refinery locations in the USA, the price of Crude Oil has been volatile and difficult to forecast accurately.
This has kept our ALGO sell signal for STO offside since it was triggered on Wednesday at $3.81.
With spot Crude Oil prices dropping over 3%, and below $47.50, during yesterday’s NY trade, the Short STO signal may look more attractive on Monday.
Santos
Crude Oil
Our ALGO engine triggered a sell signal for Santos into the close of trade yesterday at $3.81.
Recently, Santos reported solid earnings growth and have paid down a higher percentage of debt than the market expected earlier in the year.
In addition, the current rebound in Crude Oil prices has been a factor in the stock rising from $3.25 to $3.80 over the last two weeks.
With the US refineries based in Houston still preparing to come back online, and hurricane Irma now targeting Southern Florida, Santos shares could could firm into the the $4.00 resistance level, near-term.
Over a longer time-frame, we expect both Crude Oil prices and shares of Santos to trade lower.
We will watch these two markets closely and give specific trade levels once a clear trade signal emerges.
Santos
After taking a US$ 1.1 billion write-down on its GLNG project in Queensland, Santos posted a full-year loss of US$ 1.05 billion. No interim dividend was paid.
The oil and gas producer claims their free cash flow is at a Crude Oil price of US$36.50 per barrel, which is considerably lower than current levels.
The share price is essentially unchanged on the day. Longer-term investors can look for buy interest to return near the November lows at $3.50.
Crude Oil prices surged as much as 10%, almost reaching the $50.00 mark, as the Organization of Petroleum Exporting Countries (OPEC) agreed to curb oil production for the first time since 2008 in an effort to reduce oversupply and support prices.
The 14 nation cartel, led by Saudi Arabia, agreed to cut production to 32.5 million barrels per day, which pencils out to a 1.2 million barrel per day reduction from current levels. Saudi Arabia agreed to take the lion’s share of the cut; lowering their daily production by 486,000 barrels per day to get the deal done.
Russia, the world’s largest Non-OPEC producer, had long resisted cutting output but has tentatively agreed to join the effort by reducing production by 300,000 barrels per day. OPEC will meet with Non-OPEC producers on December 9th.
If history is an accurate gauge, the bullish market response to this deal may be short lived. OPEC members haven’t shown a strong track record of compliance to previous production agreements. As such, the recent price action in Crude Oil could reverse over the near term as more details are released.
Santos Energy Group (STO) report a sharp rise in Q3 production and sales allowing the company to re-calibrate its forward guidance to the top end of the range.
For the three months ending September 30, Santos posted a 31% increase in sales volume to 21.3 million barrels of oil while forward production advanced 7% to 15.5 million barrels. Sales volumes are anticipated to hit 81-83 million barrels for the full year.
Overall LNG sales volumes more than doubled to 1.3 million tons as the ramp-up of the company’s cornerstone GLNG project in Queensland accounted for 755,000 tons and shipping 21 cargoes in Q3.
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