Australian Santos Reports 1H Underlying Profit of $156mn
Australian Santos has reported an underlying profit of $156mn in the six months that ended June 30, compared with an underlying loss of $5mn in the same period last year, helped by higher oil and gas prices and lower costs.
The net loss stood at $506mn, including a previously announced $689mn after-tax net impairment. In the first half of last year, the company's net loss was more than $1bn, Santos said August 24.
Upstream production costs dropped by 12% to $239mn ($8.08/b), primarily due to cost savings, efficiency gains across the core assets and the sale of non-core assets.
Higher LNG sales -- reflecting the ramp-up of GLNG and strong performance from PNG LNG -- combined with higher prices for all products caused total revenue to increase by 24% to $1.5bn. The average realised oil price was up 28% at $54.79/b and the average LNG price was 26% higher at $7.21/mn btu. LNG sales revenue was up 44% due to the ramp-up of GLNG and the strong performance from PNG LNG.
Forecast free cash flow breakeven for 2017 sits at $33/b, Santos CEO Kevin Gallagher said, and the company generated $302mn in the first half.
“This is pleasing progress towards our goal of transforming Santos into a low-cost, reliable and high performance business with a strong portfolio that can generate significant free cash flow in a low oil price environment,” Gallagher said. “Our focus on more efficient, lower cost operations has delivered significant improvements in earnings and cash flow. Santos’ core asset portfolio of five long-life natural gas assets now provides stable base production for the next decade."
Material reductions in drilling costs in the Cooper Basin and GLNG are unlocking more gas supply, Santos said. In the coming months, Santos expects to announce further domestic supply contracts to support the federal government’s efforts to deliver affordable and reliable energy to households and industry.
It has upgraded 2017 sales volume guidance to 77mn boe to 82mn boe, following strong volumes from the core assets in the first half and higher forecast domestic sales volumes.
Santos’ portfolio is focused on five core natural gas assets: Cooper Basin, GLNG, PNG, Northern Australia and Western Australia Gas. Other assets (Asia, NSW and WA oil) have been packaged and run separately for value as a standalone business.
Production from the core assets increased by 2% to 25.3mn boe in the first half of the year on the back of the GLNG and PNG production. Sales volumes from these assets were up by 5% to 36.1mn boe, with the two LNG projects' performances and higher WA gas being partially offset by lower Cooper Basin sales.
Shardul Sharma