Macquarie picks Santos amid Australia's east coast gas supply uncertainty

STO

21/03/2023 03:18

** Macquarie says Santos Ltd  STO.AX  is the top pick among
oil and gas producers ahead of clarity from the Australian
government on gas price regulation in the east coast gas market
    ** Says preference for Santos is driven more by liquefied
natural gas (LNG) and free-cash-flow growth than its east coast
gas position
    ** Brokerage adds that intervention in gas market has
weighed on shares of Santos, Beach Energy  BPT.AX  and Cooper
Energy  COE.AX , but government clarity might be a positive
catalyst
    ** Energy market operator last week warned LNG exporters may
need to divert excess supply for domestic customers to stave off
any potential supply shortages this winter in the country's
south
    ** If a milder winter plays out from April-June, it means
any gas market squeeze in June/July/August is likely to be far
more manageable - Macquarie
    ** Govt's decision will need to be at a level that
encourages investment but prevents full pass-through of netback
prices when elevated, broker says
    ** Expects clarity from the govt to allow gas producers to
resume upstream investment, help build capacity and alleviate
projected shortages over coming years
    ** YTD, shares of STO, BPT and COE down 5.6%, 17.9% and
21.6%, respectively, as of last close

 (Reporting by Savyata Mishra in Bengaluru)
 ((Savyata.Mishra@thomsonreuters.com))