About: Santos explores for and produces natural gas, liquefied natural gas, crude oil, condensate, naptha and liquid petroleum gas. The company has grown from its base in South Australia to own assets in most Australia petroleum provinces in and across Asia. The company conducts major onshore and offshore petroleum exploration in Asutralia and Papua New Guinea and also has operations in crude oil pipeline transportation.

Why it’s in the portfolio: Santos has recently acquired assets of Quadrant Energy in WA which has effectively lowered the costs within the core business. The company looks set to enter in to a stage of growth with projects all across the country set to take place in the short-term. Santos aims to double production by 2025, which leaves room for some considerable stock price appreciation should the targets be achieved.

Fundamentals: STO has a market cap of almost $14b. STO currently trades on a 1-year forward price-to-earnings ratio of around 15x and at around 1.3x price-to-book. STO’s 1-year forward dividend payout ratio is low (32%). STO has a relatively modest level of debt relative to assets (29%).

What could go wrong: Lower than expected sales volumes is the key risk to Santos. The company is constantly exposed to commodity price risk due to their production of oil and LNG. Intervention of the Australian government may also prove a hindrance to growth, particularly in the domestic gas market.