PERTH (miningweekly.com) – Oil and gas giant Santos has reported record quarterly production and sales for the three months to September.
Production in the third quarter increased by 22% on the June quarter, to reach a record 25.1-million barrels of oil equivalent, with Santos telling shareholders on Thursday that all five of the company’s core assets had reported increased production, driven primarily by higher domestic gas and liquefied natural gas (LNG) volumes.
“Our disciplined, low-cost operating model continues to drive strong performance across our diversified asset portfolio. The operating model combined with our portfolio of fixed-price domestic gas contracts, enabled us to deliver higher quarterly revenues and consistent free cash flow generation despite the impact of significantly lower oil price-linked contracted LNG prices,” said Santos MD and CEO Kevin Gallagher.
Quarterly sales revenue for the three months to September was 2% higher than the June quarter, reaching $797-million, with the company noting that the fixed-price domestic gas contracts combined with higher equity level in the Bayu-Undan operation, had more than offset lower LNG pricing.
Sales volumes for the quarter ended September reached 25.2-million barrels of oil equivalent, also up from the 24.6-million barrels sold in the June quarter.
“Our base business is strong with production levels expected to remain relatively steady for the next five or six years, allowing us to continue to progress our major capital projects while maintaining capital discipline and flexibility in commitment timing,” Gallagher said.
The Barossa LNG project is continuing to progress towards final investment decision-ready status by the end of the year, subject to business conditions, joint venture agreements and relevant approvals, while pre-front end engineering design (FEED) work continues on the Dorado oil project.
The Moomba carbon capture and storage project is also progressing through FEED, while the Narrabri gas project received approval from the New South Wales Independent Planning Commission during the quarter under review.
Santos has sought development consent for up to 850 gas wells and associated infrastructure across the 95 000 ha project area, saying the Narrabri project will create up to 1 300 construction jobs and 200 operational jobs, and will shore up supply for the east coast domestic gas market.
Narrabri has the potential to produce up to 200 TJ/d for at least 20 years, which is up to half of the gas demand from New South Wales.
“As Covid-19 and the lower oil price continue to challenge us, we have remained resilient with stable revenue and consistent free cash flow generation from our core assets. Our balance sheet is strong and we remain well positioned to leverage our growth opportunities when business conditions improve,” Gallagher said.
For the full 2020, Santos has maintained its production guidance at between 83-million and 88-million barrels of oil equivalent, with sales targets also remaining stable at between 101-million and 107-million barrels of oil equivalent.