Australian LNG firm Santos revealed an initial on-market share buyback of up to $250 million as part of a new capital management framework targeting higher shareholder returns.
Santos said in a statement the new capital management framework seeks to maintain an “appropriate capital structure” that enables the firm 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 new capital management framework includes a dividend policy of 10 percent to 30 percent payout of free cash flow, excluding major growth, generated per year at an average Brent oil price up to $65 per barrel.
It also includes additional shareholder returns of at least 40 percent of the incremental free cash flow in the form of additional dividends and/or share buybacks at the board’s discretion at Brent oil price outcomes above $65 per barrel.
Lastly, the framework entails a target gearing range of 15 percent to 25 percent, Santos said.
Santos said it intends to return up to $250 million to shareholders via an on-market share buyback during the remainder of 2022 as the company had generated “strong” free cash flow at current oil prices and gearing at 26 percent at the end of March 2022.
The company expects the share buyback to start in May 2022.
Chief executive Kevin Gallagher said consistent delivery of Santos’ strategy had placed the company in a “strong financial position with a robust outlook.”
“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 $250 million because we believe the current share price undervalues the company,” Gallagher said.