Oil money spoiling in time of high supply
A leading energy analyst says shares in gas giant Santos are worthless if current oil prices and exchange rates continue.
Credit Suisse director and energy analyst Mark Samter says under a hypothetical analysis at oil prices of $US55.20 a barrel and an exchange rate at 80.6 US cents, that Santos has a negative net present value of -13 cents.
While experts admit that oil prices will not remain at current lows over the long term, the research predicts that Santos and Origin are likely to be under significant financial pressure even in the short to medium term.
Their report found that that two or three years of oil at similar levels would leave Santos below most debt ratings agencies’ investment grade by 2016.
Also, if oil prices remained around current levels, Origin would be left with a dangerously high debt-to-income ratio.
Both Santos and Origin have poured billions into the large LNG export facilities on Curtis Island off Gladstone in Queensland, but oil prices have fallen even further just this week.
West Texas crude is now at about $US46 a barrel, and Credit Suisse estimates that it would take oil prices of $US70 a barrel for Oil Search to be worth its present market value, $US81 for Woodside, $US83 for Santos and $US84 for Origin.