Business SummarySantos Limited (STO) operates in the exploration, development, production,transportation and marketing of hydrocarbons. Santos produces natural gasto Australian, Indonesian and other Asian markets, and develops oil andliquids businesses in Australia, Indonesia and Vietnam. Santos also focuseson transformational liquefied natural gas (LNG) strategy and has interests infour LNG projects in Australia.

Latest ResearchAlert: Harbour firms up bid for STO

Harbour has announced a binding, conditional proposal to acquire 100% of

STO shares by way of a Scheme of Arrangement for US$4.98/shr cash

consideration (A$6.63/shr at spot FX). The bid is unchanged in USD terms,

however involves ENN and Hony (collectively owning 15.11% of STO)being rolled into the Harbour Investment Vehicle as opposed to a newRollCo being formed for 20% of STO shareholders. The bid is conditionalon confirmatory due diligence, Board recommendation of the SoA, FIRBapproval and shareholder acceptance.

The offer is currently under consideration by the board, with noshareholder recommendation made.

For more information see research 18 May 2018.

GICS - Energy

Santos Limited

ASX Code: STO Price: $5.82 12 Mth Target Price: $5.47 Rating: Sell

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

15 June 2018$12,123m2,082.9m$6.46$2.87

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Sell$5.47-6.7%6.1%-0.6%

Investment FundamentalsFYE 31 Dec 2017A 2018F 2019F 2020F

Profit $m 438.0 743.0 1,040.0 664.0Profit (norm)* $m 438.0 743.0 1,040.0 664.0

EPS* ¢ 21.0 36.0 50.0 31.0EPS Growth % 320.0 71.4 38.9 -38.0P/E* x 27.9 16.3 11.7 18.9P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 0.0 7.0 25.0 16.0Yield % 0.0 1.2 4.3 2.7Franking % 0.0 0.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2013A 2014A 2015A 2016A 2017A

Sales Revenue 3,641 4,037 3,246 3,585 3,983Total Revenue ex. Int. 3,675 4,111 3,307 3,847 4,224EBITDA 1,743 1,833 -5,974 -549 531Depreciation & Amort. -888 -988 -1,059 -1,024 -951Goodwill Amortisation -- -- -- -- --EBIT 855 845 -7,033 -1,573 -421Net Interest -17 -97 -290 -388 -346Profit Before Tax 838 748 -7,323 -1,961 -767Income Tax -334 -215 1,877 580 308Outside Equity Int. -- -- -- -- --Profit after Tax 504 533 -5,446 -1,381 -459Significant Items after Tax 12 -1,468 2,748 -66 -3Reported Profit after Tax 516 -935 -2,698 -1,447 -462Preferred Dividends -- -- -- -- --

Cash Flow ($M)2013A 2014A 2015A 2016A 2017A

Receipts from Customers 3,726 4,399 3,562 3,742 4,124Funds from Operations 1,941 2,177 1,527 1,531 2,059Net Operating Cashflow 1,628 1,843 1,094 1,184 1,600Capex -4,242 -3,374 -2,007 -304 -876Acquisitions & Investments -- -15 -- -- --Sale of Invest. & Subsid. -- -- -- -- --Net Investing Cashflow -4,419 -3,611 -2,102 -307 -685Proceeds from Issues 9 10 3,193 1,013 191Dividends Paid -157 -196 -215 -59 --Net Financing Cashflow 1,262 1,895 1,366 750 -1,946Net Increase Cash -1,529 127 358 1,628 -1,031Cash at Beginning 2,147 644 775 1,159 2,597Exchange Rate Adjust. 26 4 21 12 12Cash at End 644 775 1,154 2,800 1,578

Ratios and Substantial Shareholders2013A 2014A 2015A 2016A 2017A

Profitability RatiosEBITDA Margin % 47.87 45.41 -184.04 -15.30 13.32EBIT Margin % 23.48 20.93 -216.67 -43.87 -10.56Net Profit Margin % 13.84 13.20 -167.78 -38.51 -11.52Return on Equity % 4.93 5.66 -53.38 -14.11 -5.01Return on Assets % 2.66 2.75 -23.89 -5.19 -1.11

Debt/Safety RatiosNet Debt/Equity % 50.21 79.43 61.43 45.38 37.92Interest Cover x 50.29 8.71 -24.25 -4.05 -1.21

Top 5 Substantial ShareholdersENN Ecological Holdings Co Ltd 15.1%Great Multitude Limited 14.9%BlackRock Group 5.0%

Balance Sheet ($M)2013A 2014A 2015A 2016A 2017A

Cash & Equivalent 644 775 1,154 2,800 1,578Receivables 793 633 539 507 564Inventories 419 443 495 444 341Other Current Assets 222 214 182 77 45Current Assets 2,078 2,065 2,921 4,077 2,528Prop. Plant & Equipment 16,082 18,689 17,301 14,556 12,387Intangibles -- -- -- -- --Other Non-Current Assets 253 224 188 84 45Non-Current Assets 18,531 20,280 19,005 17,015 15,044Total Assets 20,609 22,345 21,926 21,092 17,572Interest Bearing Debt 5,771 8,252 7,421 7,240 5,055Other Liabilities 4,626 4,680 4,303 4,067 3,349Total Liabilities 10,397 12,932 11,724 11,307 8,404Net Assets 10,212 9,413 10,202 9,784 9,168Share Capital 6,749 6,905 10,192 12,276 11,582Reserves 47 346 985 -705 65Retained Earnings 3,420 2,166 -975 -1,787 -2,479Outside Equity Int. -4 -4 -- -- --Total Shareholders Equity 10,212 9,413 10,202 9,784 9,168

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Amanda DevonishMr Christian Paech

Directors

Mr Keith William Spence(Non-Executive Director,Non-ExecutiveChairman)Ms Yasmin Anita Allen(Non-Executive Director)Dr Vanessa Ann Guthrie(Non-Executive Director)Mr Hock Goh(Non-Executive Director)Mr Guy Michael Cowan(Non-Executive Director)Mr Peter Roland Hearl(Non-Executive Director)Mr Kevin Thomas Gallagher(Chief Executive Officer,ManagingDirector)Mr Yujiang (Eugene) Shi(Non-Executive Director)

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Santos Limited

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