Oz Santos Raises Production Guidance

Australian Santos on December 1 upgraded its 2020 production guidance to 87-89mn barrels of oil equivalent from 83-88mn boe, citing strong operating performance across its base business. It also lowered the production cost guidance to US$8.00-8.50/boe.

The increase in its guidance represents a 15-18% growth in output for the year, and a growth of more than 50% since 2015, the company said. Capital expenditure is still expected to be approximately US$900mn, consistent with the 38% reduction for the year announced in March.

Integration of the ConocoPhillips acquisition completed in May 2020 is ongoing, the company said, with guidance on acquisition synergies upgraded to US$90-105mn/year.

"Our strategy has been to establish a disciplined low-cost operating model that delivers strong free cash flows through the oil price cycle. Our 2020 forecast free cash flow breakeven oil price is less than US$25/barrel before hedging and around US$20/barrel after hedging," CEO Kevin Gallagher said.

Santos also announced a step towards a final investment decision on the Barossa project with Darwin LNG (DLNG), approving tolling agreements to transport and process Barossa gas through DLNG.

The company had deferred the investment decision on the Barossa project in March owing to the uncertain economic impact of Covid-19 and lower oil prices. The Barossa field sits within Santos' northern Australia portfolio, one of the company's core long-life, natural gas asset regions. The project area encompasses petroleum permit NT/RL5 located offshore Northern Territory.

Barossa is being developed as backfill for Darwin LNG. Santos sold 12.5% interest in the project to Japanese Jera in April.