PERTH (miningweekly.com) – Oil and gas major Santos on Wednesday announced a new capital management framework targeting higher shareholder returns and including an initial on-market share buyback of up to $250-million.

The ASX-listed company told shareholders that the strategy is to maintain a disciplined, low-cost operating model that is designed to deliver strong cash flows through the oil price cycle.

The new capital management 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 new capital management framework includes a dividend policy of 10% to 30% payout of free cash flow, excluding major growth, generated yearly at an average Brent oil price up to $65/bl.

Additional shareholder returns of at least 40% of the incremental free cash flow will also be paid in the form of additional dividends and/or share buybacks at the board’s discretion at Brent oil price outcomes above $65/bl.

The capital management strategy also included a target gearing range of 15% to 25%.

Santos noted that given the strong free cash flow being generated at current oil prices and gearing at 26% at the end of March, the company intends to return up to $250-million to shareholders via an on-market share buyback during the remainder of 2022.

The share buyback is expected to commence in May.

Santos MD and CEO Kevin Gallagher said consistent delivery of Santos’ Transform Build Grow 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.”