Fin Review reporters are convinced there is no other buyer.... how can they rebuff the Murdoch press with so much confidence who have reported Macq might be in the race too?
What would Santos look like at $US90 a barrel?
A quick recap on the situation at Santos: Suitor Harbour Energy is believed to be in the
late stages of firming up its $13.7 billion indicative bid, Santos' board is waiting for an offer and hedge funds are wondering whether Santos can push the bidder higher and gain regulatory approvals.
There are plenty of balls in the air. And given the transaction's live nature, it is interesting to see Morgan Stanley's commodities team upgrade its house view on oil prices.
Morgan Stanley's team reckons Brent oil will be $US85 a barrel by the end of 2019 and $US90 a barrel by 2020. It had previously forecast $US65 a barrel in both 2019 and 2020 and attributed the upgrade to strong global demand and regulatory changes. The long-term price was lifted to $US70 a barrel, from $US65.
And should oil trade at such levels, Morgan Stanley analysts reckon Santos' free cash yield could hit 15 per cent in 2020 and it could be just about debt free.
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Free cash yields of Australian E&P stocks with oil at $US90 a barrel by 2020, according to Morgan Stanley's equities research analysts.
The question for Santos - and its investors - is what would that mean for the company's future value?
[Morgan Stanley's analysts did not change any target prices for Australian E&P stocks as a result of the oil price upgrade. Its team is also restricted on Santos, while its investment bank is an adviser to Harbour Energy].
Oil price forecasts are at the heart of the debate as to whether Santos can squeeze a larger price out of Harbour Energy.
The market's view has shifted since Harbour Energy entered Santos' data room in early April, as seen by Morgan Stanley's revisions.
But does that mean the Santos board's view has shifted, or Harbour Energy's?
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Gearing levels of Australian E&P stocks with oil at $US90 a barrel by 2020, according to Morgan Stanley's equities research analysts.
Harbour Energy,
which is bidding alongside Swiss based energy and commodities trader Mercuria Energy and leaving room for China's ENN, is believed to be very comfortable with its $US4.98 a share bid that it lobbed at the beginning of last month.
That bid was worth $6.50 a share when it landed and is up towards $6.60 after currency movements. It bid against itself three times to get to that mark and, with no rival bidder in the wings, it's understandably not keen to do so again.
Santos shares were up 2 per cent to $6.36 on Wednesday morning.
(20min delay)