PERTH (miningweekly.com) – Oil and gas major Santos has reported record production of 26-million barrels of oil equivalent during the three months ended March.

Production in the first quarter of 2022 was up 14% on the December quarter of last year, while sales volumes climbed by 8% in the same period, to 28.1-million barrels.

The first quarter sales volumes were higher than the prior quarter primarily owing to the completion of the Oil Search merger in December of last year, and this was partially offset by lower domestic gas volumes in Western Australia, owing to natural field decline at the Bayu-Undan operation.

Strong production combined with higher commodity prices delivered record quarterly free cash flow of $865-million, an increase of 186% from the corresponding period last year, Santos said.

“By designing our portfolio to provide strong cash flows throughout the commodity price cycle, our disciplined, low-cost operating model has positioned us to take full advantage of the increase in commodity prices,” MD and CEO Kevin Gallagher said.

“Today’s results demonstrate that our business has the size, scale and cash flows to enable Santos to deliver stronger shareholder returns.”

Looking ahead at 2022, Santos has set a full-year production guidance of between 100-million and 110-million barrels of oil equivalent, with sales volumes targeted at between 110-million and 120-million barrels.

The ASX-listed major is expected to spend $1.1-billion on base capital expenditure, including restorations, and between $1.15-billion and $1.3-billion on major projects.

“Consistent with our strategy, our next stage of growth will be disciplined and phased appropriately. The Barossa project is 33% complete and making excellent progress, while the Moomba carbon capture and storage (CCS) project will deliver a step-change in our emissions profile when it comes online in 2024,” said Gallagher.

“Our goal is to deliver superior shareholder returns while being a global leader in the transition, providing cleaner energy and clean fuels that are affordable and reliable.”

Following a final investment decision in November 2021, the Moomba CCS project is 14% complete and progressing on budget and schedule for first injection ofcarbon dioxide in 2024. Key procurement packages have been awarded and are progressing as planned.

The Moomba CCS project is an important enabler for the production of hydrogen, Santos told shareholders, noting that engineering, commercial and marketing studies were progressing on the Moomba hydrogen project with the goal of positioning the project as Australia’s lowest cost and one of the largest commercial hydrogen opportunities.

A front-end engineering design entry decision is targeted in 2022.

Meanwhile, the Barossa gas and condensate project to backfill Darwin liquefied natural gas (LNG) is 33% complete and remains on schedule and on budget for first production in the first half of 2025.

Construction of the floating production and storage operation hull and topsides continues to progress in Korea and Singapore, respectively. Manufacture of 92 000 t of line-pipe for in-field flowlines and for the gas export pipeline is now complete, while manufacture of subsea hardware is well progressed. Drilling equipment has been staged in Darwin, with drilling on track to commence around mid-year.

The pipeline installation campaign is due to start by late 2022. The Darwin LNG life extension project remains on schedule and budget with preliminary civil works completed on site.

The sale of a 12.5% interest in the Barossa project to JERA is expected to complete by the end of April following the completion of all regulatory approvals, with cash proceeds owing to Santos at completion expected to be approximately $327-million.