Santos' Gladstone LNG Outlook May be Conservative: RBC

There could be some upward pressure building below Santos’ guidance for 2019 onwards of 6mn metric tons/year of production at the Gladstone LNG project in Queensland, Australia, RBC Capital Markets analyst Ben Wilson said November 17.

“We suspect there was a fair degree of conservatism in the 6mtpa GLNG guidance from 2019+ set at last year’s Investor Day with management likely erring on the side of caution in resetting market expectations,” he said.

And, the 2017 GLNG drilling program has exceeded plans with an expectation of roughly 170-180 wells being about 25% above budget, he said, while also noting reduced drilling costs.

“We expect to see further increases in drilling at GLNG over the next few years above the [approximately] 250 wells targeted for 2018,” he said, adding that RBC is still currently modelling 6mn metric tons/year at GLNG from the end of 2019 but it will be watching the drilling program and production closely for evidence that it is tracking ahead of schedule.

GLNG’s nameplate capacity is 7.8mn metric tons/year. The first train of the two train facility began production in October 2015 with the second following in June 2016.

Santos said November 16 it rejected an indicative takeover proposal received in August from energy investment company Harbour Energy, an investment vehicle seeking upstream and midstream assets that was formed by New York private equity firm EIG Global Energy Partners. EIG/Harbour were behind Chrysaor's recently completed up-to-$3.8bn purchase from Shell of UK North Sea assets.

Nathan Richardson