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Santos Releases Quarterly Activities Report after Rejecting Takeover Proposal

Santos Releases Quarterly Activities Report after Rejecting Takeover Proposal
Oct 23, 2015 By Simon Herrmann Tags: STO

Santos Limited (ASX:STO) released its third quarter activities report today after rejecting a $7.1bn takeover proposal of Scepter Partners.

LNG Sales Volumes Exceed 1MT; Santos Lowers Capital Expenditure Guidance

In an announcement to the ASX this morning Santos advised that its LNG sales volumes exceeded 1 million tonnes year-to-date and that volumes have more than doubled in 2015. Third quarter production of oil was 4% higher than the corresponding quarter.

Santos Chief Executive Officer David Knox said: “The delivery of GLNG is one of the most significant milestones in our company’s history. It marks Santos’ transition from a domestic gas company to an important Asian LNG player.”

Apart from solid production figures, Santos will continue to focus on cost savings by executing its cost reduction program. Unit production costs are down 15% while production is up 10%, which Mr Knox calls “producing more for less”. The Company lowered its capital expenditure guidance for 2015 by 10% to $1.8bn.

Sales revenue fell 24% with an average realised oil price of A$71 per barrel down 38% compared to pcp.

Santos Rejects $7.1bn Takeover Bid as Offer is “Opportunistic”

On Thursday Santos advised the ASX that it had received a non-binding proposal from Scepter Partners to acquire all of Santos shares with an implied value of A$6.88 per STO share. The board of Santos has decided to reject the proposal as it considers the offer to be “opportunistic in nature” and not appropriately reflecting the fair value of the company.

Santos is currently in the process to review its operations and consider all its options to maximise shareholder value. The board gave a hint that it may accept future offerings if they reflect the true value of the business.

STO shares gained 88 cents or 16.2% on Thursday to close at $6.32, still well below the takeover price. STO shares have halved in value in the past 12 months.

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Simon Herrmann Author: Simon Herrmann Oct 23, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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