PERTH (miningweekly.com) – Oil and gas major Santos has doubled its interim underlying profit in the six months to June, as revenues surged.
Underlying profit for the interim period was reported at $217-million, compared with the $109-million in the previous corresponding period, while earnings before interest, taxes, depreciation and amortisation were up by 23%, from $718-million to $883-million.
Net profit after tax reached $104-million, compared with a net loss after tax of $506-million in the previous corresponding period.
“Our strategy has been to establish a low-cost operating model that delivers strong cash flows through the oil price cycle,” said Santos MD and CEO Kevin Gallagher.
He said the half-year results demonstrated the delivery of this strategy, with free cash flow also up by 22%, to $367-million.
“Strong free cash flow has enabled the company to reduce net debts to $2.4-billion and reinstate dividends to shareholders,” he added.
“These results are despite the loss of production from our Papua New Guinea operations, due to the earthquake, and further emphasise the value of our core asset diversified portfolio.”
Santos produced 28-million barrels of oil equivalent in the six months under review, compared with the 30-million barrels of oil equivalent produced in the previous six months, with production impacted by the earthquake in Papua New Guinea, as well as major planned shutdowns at the Darwin liquefied natural gas (LNG) project, and natural field decline in Indonesia.
Sales volumes for the half-year were down from the 43.3-million barrels of oil equivalent reported in the previous six months, to 38-million barrels of oil equivalent. It was also lower than the 40.1-million barrels of oil equivalent produced in the previous corresponding period.
However, sales revenue was up 16% on the previous corresponding period, from $1.44-billion to $1.68-billion.
Meanwhile, Gallagher noted that consistent application of Santos’ disciplined operating model continued to deliver cost reductions and efficiencies in the first half of the financial year, with underlying production costs down 4%, to $7.79/bl of oil equivalent, with further efficiency gains in onshore drilling confirming Santos as Australia’s lowest cost onshore operator.
“Continued cost reductions and efficiencies has enabled a reduction in full-year unit production guidance to between $8/bl and $8.60/bl of oil equivalent. This reduction guidance is despite the impact of the Papua New Guinea LNG earthquake shutdown in the first half.”
Gallagher said that Santos was expected to shortly achieve its net debt reduction target, more than a year ahead of schedule, and would have a significantly stronger balance sheet to support its growth strategy.
Santos on Wednesday announced a $2.15-billion bid for Western Australia-focused oil and gas producer Quadrant Energy, which holds natural gas and oil production, as well as near- and medium-term development, appraisal and exploration assets across more than 52 000 km2 of acreage, predominantly in the Carnarvon basin.