PERTH (miningweekly.com) – Oil and gas major Santos has reported a record quarter of production during the three months to June, with production topping 20.6-million barrels of oil equivalent, a 15% increase on the previous quarter.

Half-year production was also up by 4% on the previous period, to a record 38.5-million barrels of oil equivalent, with Cooper basin and Queensland equity gas production up 18% and 15% respectively.

The strong production result was driven by higher domestic gas production in Western Australia, continued strong onshore production and higher equity interest in Bayu-Undan, following the completion of the ConocoPhillips acquisition.

“Our disciplined, low-cost operating model continues to drive strong performance across our diversified asset portfolio and completion of the ConocoPhillips acquisition in late May further boosted our production and cash flows,” said Santos MD and CEO Kevin Gallagher.

“The operating model allowed us to maintain activities key to sustaining strong operational performances across all of our core assets. As a result, we are realising lower costs from the initiatives announced in the first quarter and are targeting a free cash flow breakeven oil price of $25/bl for 2020.”

Half-year sales revenue for the period ended June was down 16% on the previous first half, reaching $1.7-billion, but the strong operational and cost performance delivered $431-million of free cash flow in the first half.

The company on Thursday said that 60% of production volumes for the remainder of 2020 are either fixed-price domestic gas contracts, or oil hedged at an average floor price of $38/bl.

“As Covid-19 and the lower oil price continues to challenge us, we have remained resilient and kept production going, meaning our revenues have continued to flow. Our balance sheet is strong and we remain well positioned to leverage our growth opportunities when business conditions improve,” Gallagher said.

He added that by maintaining its sustaining activities, Santos’ production levels from the core assets are expected to remain relatively steady for the next five to six years, allowing the company to continue to progress its major capital projects while maintaining capital discipline and flexibility in commitment timing.

For the full 2020, Santos is expecting production to reach between 83-million and 88-million barrels of oil equivalent, while sales volumes would reach between 101-million and 107-million barrels of oil equivalent.