The brand of Australian oil and fuel producer Santos Ltd is pictured at their Sydney workplace February 15, 2016. REUTERS/Jason Reed/File photograph

MELBOURNE, Aug 17 (Reuters) – Santos Ltd (STO.AX) mentioned on Wednesday it should transfer forward in growing a $2.6 billion Alaskan oil mission, a shock choice for the market that drove its shares down regardless of the Australian vitality producer posting a document first-half revenue.

The corporate additionally mentioned it was in superior talks with shortlisted events to promote a 5% stake in its prized asset, PNG LNG in Papua New Guinea, and reap an estimated $1.5 billion, which analysts anticipate will likely be used to fund the Pikka mission in Alaska.

Santos Chief Govt Kevin Gallagher mentioned Pikka, co-owned by Spain’s Repsol SA (REP.MC), was “the correct mission on the proper time in the correct location”, forecasting a powerful 19% inner fee of return primarily based on an oil value of $60 a barrel.

“Low-carbon oil initiatives like Pikka Part 1 reply to new demand for OECD provide and are important for world and United States vitality safety that has been highlighted because the Russian invasion of Ukraine,” Gallagher mentioned in an announcement.

Analysts had thought Santos would promote its 51% stake in Pikka quite than go forward with the 80,000 barrels per day mission because it has its palms full engaged on a significant fuel mission and potential oil growth in Australia.

Nevertheless, Santos mentioned on Wednesday the oil growth in Australia, Dorado, wouldn’t go forward this 12 months because of inflationary pressures and provide chain uncertainty.

Credit score Suisse analyst Saul Kavonic mentioned forward of the announcement on the Alaskan mission that there was a “danger of adverse market response” if the corporate went forward with Pikka as it’d have to promote a stake in its prized asset, PNG LNG in Papua New Guinea, “to fund the junk (Alaska)”.

Santos shares fell 2.3% after saying the ultimate funding choice on Pikka. The broader market (.AXJO) was down 0.3% and the Australian vitality index (.AXEJ) shed 0.7%.

Gallagher mentioned the corporate expects to reap proceeds from the 5% stake sale in step with analysts’ valuations, that are round $1.5 billion.

Santos mentioned in February it aimed to lift $2 billion and $Three billion from asset gross sales this 12 months.

It posted underlying internet revenue of $1.27 billion for the half 12 months ended June 30, in contrast with $317 million a 12 months earlier, buoyed by surging fuel and oil costs. The revenue beat forecasts of round $1.13 billion in line with Seen Alpha.

Santos – which turned a world top-20 oil and fuel agency after its $6.2 billion buyout of Oil Search final 12 months – boosted its interim dividend by practically 38% to 7.6 cents per share.

The corporate additionally mentioned it might enhance its deliberate on-market share buyback to $350 million from $250 million.

Extra reporting by Riya Sharma in Bengaluru; Enhancing by Subhranshu Sahu and Muralikumar Anantharaman

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