LNG price increased 14% over prior quarter. Sales volume up 9%, revenue up 15% on prior quarter. JCC and JKM prices up over quarter. Free cashflow of $1 billion USD (47c AUD per share) over Q3.

JCC price averaged $111 USD /bboe over Q3, so LNG price likely to soften over the next 2-3 quarters.

DISC - HELD

Europe will has become the marginal buyer of LNG, driving up JKM LNG spot prices. Currently, JKM sport price for LNG is about $48 USD/ MMBtu. This is up from $23 USD/ MMBtu in June.

Santos's spot cargo sales prices are JKM-linked, which means, as a result, spot price earned on Santos's spot prices are likely to double in Q3. Now, with oil prices remaining above the JCC contract price, we can assume the contract portion will remain relatively stable. Now, 10-20% of all sales are sport price typically. If one assumes the number is 15%, the average LNG price for Q3 will be at least 11% above Q2 prices.

STO 2022 EPS is likely to exceed $1.10 per share should LNG price remain elevated. tom line.

Europe will likely remain the marginal buyer for LNG through to 2023 as alternative NG supplies come online.

Santos has been benefiting from high energy prices, due to potential and actual supply shortages. However, this could be de-railed by a global recession.

US Fed Chair Powell has demonstrated his determination to tackle inflation, through a 75 bps hike last week, along with hawkish guidance and the QT rollout. He to be prepared to risk a recession to tame inflation.

The reality is, central banks can only tame inflation by taming oil prices. The question is, will demand fall more than supply? It appears that oil supply will only begin to decline when the EU ban takes hold later this year, buy which time, we may well be into a full blown recession....Demand may well fall before supply constraints kick in.

Could be a rough ride for shareholders in the short term.

Notable, Santos was receiving $13.77 USD per mmBTU for LNG last quarter. They indicating an increasing proportion of spot pricing, with 13 of 60 cargoes selling at spot prices.

For those playing along at home, attached image shows the current LNG prices against the average price Santos earned for its LNG last quarter. Santos's LNG contract prices will move towards the spot price over time, and will likely increase spot shipemnts over time to exploit the high prices.

The question is, how long will LNG prices remain this high? Well this depends on the Ukraine war, and there is a possibility this war will have a lasting impact on supply - there are no certainties in geo-political conflict, but it is one risk, I think that it is definately non-zero. I will post my thoughts on this in a separate post.

DISC - I HOLD

prices for JCC (Japan Customs Cleared Crude) LNG price, and JKM (Japan Korean Marker) LNG prices:

Key Takeaways:

1. Record revenue of $1.9 Billion USD
2. record production of 26 mmboe.
3. Record free cashflow of $865 M USD. That's free cashflow of $2.47 per share per annum.
4. Debt reduced to 26% of equity.
5. LNG revenue of $1.1 BN USD (58% of revenue).

Note: Most LNG contracts are lagging spot price. LNG sales price was $13.77 / mmBTU. this compares with the two pricing benchmarks:

a) Japan LNG (LCC) price of $18 / mmBTU.

b) JKM (Japan / Korean Marker) spot price of $25.67 / mmBTU.

There is significant upside in the LNG prices going forward, to the tune of around 20-30%, most of which will fall to the bottom line.

DISC - HELD