Santos (ASX:STO) to deliver an on-market share buyback

Energy giant Santos (ASX:STO) has announced an on-market share buyback of up to $338 million (US$250 million) as part of a new capital management framework.

The new framework includes plans to pay out 10 per cent to 30 per cent of free cashflow in dividends at an average oil price of $US65 a year. At a higher oil price, 40 per cent of free cashflow may be paid out in dividends.

Santos said its strategy is to maintain a disciplined, low-cost operating model that is designed to deliver strong cash flows through the oil price cycle.

It also said the new framework seeks to maintain an appropriate capital structure that enables Santos to balance the allocation of capital between investment in the business, the development of strategic growth and clean energy projects, and the provision of sustainable returns to shareholders at higher commodity prices

The share buyback is expected to commence next month. 

“We are now in a position to target higher shareholder returns through our new capital management framework and are pleased to announce an initial on-market share buyback of up to US$250 million because we believe the current share price undervalues the company,” said chief executive officer Kevin Gallagher.

Shares in Santos (ASX:STO) are trading 0.8 per cent lower at $8.26.