Will Santos raise equity?

The market is concerned Santos will need a cut-price capital raising. How real is that fear, asks Gaurav Sodhi.

For a business renowned as a producer of gas, lower oil prices have had a calamitous impact on Santos: for the first time in more than two decades, the company reported a full-year loss recently (see Santos: Result 2014 on 24 Feb 15 (Buy – $8.15)) as lower oil prices forced asset writedowns; the share price is down about 40% since we upgraded the stock in Get your claws into Santos on 2 Oct 14 (Buy – $13.48); and expectations of a cut-price capital raising persist. Even as oil grudgingly recovers, the woes of Santos, in the eyes of many investors, haven’t been relieved.

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