RE:Santos today announced the Papua LNG joint ventureI have been a long term holder of this stock and recent management actions have been quite underwheling.
1. Decision to sell Canadian business - No apparent value add to the shareholders. Letting go of a cash flow positive unit with no plans to re-deploy funds, some starnded assets in Canada & US.
2. Huge war chest of cash - It has been about 7-8 months that the canadian asset disposition was announced. Management couldnt come up with any plans to return value to share holders or reinvest back in the business. In this period of high inflation, to sit for such a long time when more than 50% of your market cap is cash is unacceptable. During Q2 2022 con call the CEO clearly states that they will not reinvest captial in the business before all rigs are up and running which is 12-18 months down the line. Capex per rig is around $2-4 mil so the remaining cash shud be returned either as special div, large NCIB or by returning div to $0.20/year. Again, no plans, no directions yet.
3. Other than going back in the past and projecting past revenue and margins, there is no concrete guidance from leadership on the growth/margin potential.
4. Random businesses (PIMS) popping up (again with no revenue or margin guidance) in PNG which dont benefits shareholders in any way.
Papua LNG and Pnyang gas field development will happen if the LNG market remains strong but I doubt this company will survive to give adequate returns to shareholders. Eventually will be accquired for 0.8-0.9x BV which will be a very dissapointing outcome to what could have been a $3-$4 share plus dividend around 2023-24.