PERTH (miningweekly.com) – Oil and gas major Santos has reported a 153% decline in profits after tax for the 2020 financial year, with the company swinging to a net loss of $357-million.

Santos on Thursday reported record annual production of 89-million barrels of oil equivalent for the full 2020, along with sales volumes of 107-million barrels of oil equivalent and free cash flows of $740-million, which was down 35% on the previous financial years.

Sales revenue for the full year declined by 16%, from $4.03-billion to $3.3-billion, while earnings before interest, taxes, depreciation and amortization declined by 23%, to $1.8-billion.

Underlying profit for the full year declined by 60%, to $287-million, while Santos swung from a net profit of $674-million in 2019 to a net loss after tax of $357-million.

The company told shareholders that the results reflected significantly lower oil and liquefied natural gas (LNG) prices compared with the previous year, owing to the impact of the Covid-19 pandemic on global energy demand.

Santos MD and CEO Kevin Gallagher said that the 2020 results again demonstrated the resilience of the company’s cash-generative base business in a lower oil price environment and strong operational performance across its diversified asset portfolio.

“The improvements in our base business in recent years were perfectly illustrated in 2020 with an average realised oil price of $47 per barrel generating more than three times the free cash flow as generated in 2016 at a similar average oil price.

“2020 saw us ride through the bottom of the cycle while still generating free cash flow under a sustainable and disciplined operating model. As prices and demand recover, our projects are much better placed than those of our competitor countries. Living by our disciplined approach to cost and capital allocation, and remaining cash flow positive through 2020 means we are well positioned for further efficiency gains and growth initiatives in 2021.”

Gallagher said that consistent application of Santos’ low-cost disciplined operating model continued to deliver cost reductions and efficiencies, with unit production costs down 10% to $6.50/bl of oil equivalent, excluding the ConocoPhillips acquisition.

“In December 2020 we announced an ambitious roadmap to net-zero emissions by 2040, new emissions reduction targets and a commitment to work with our customers to reduce their emissions. Our Moomba carbon capture and storage project is final investment decision-ready, subject to eligibility for Australian Carbon Credit Units.

“The Barossa LNG project remains on track for a final investment decision in the first half of 2021. In December, we signed a long-term LNG offtake agreement with Mitsubishi for 1.5-million tonnes per annum of Santos equity LNG and executed agreements to transport and process Barossa gas through the Darwin LNG facilities.

“All required consents and approvals are now in place for our sell-down of 25% interests in Bayu-Undan and Darwin LNG to SK E&S, which is now binding and subject only to FID. We also continue to progress the binding sale and purchase agreement with JERA for the sale of a 12.5% interest in Barossa.

“We have made significant progress on our exciting Dorado project and aim to take a front-end engineering design entry decision in the first half of 2021 while also advancing plans to drill the Apus and Pavo prospects in 2021/22.

“The Narrabri gas project received environmental approvals from the state and federal governments in 2020, and planning is now well underway for the two-year appraisal programme commencing later this year. Narrabri has the potential to supply up to half of NSW’s natural gas demand,” Gallagher said.

“Our strongly cash-generative base business and diversified portfolio means that we are well positioned to drive free cash flow as commodity prices recover,”  he said.