PERTH (miningweekly.com) – Oil and gas major Santos has reported a 14% drop in revenue for the three months to March, as both production and oil prices tumbled.

Production for the quarter was down 4%, from the 18.7-million barrels of oil equivalent produced in the December quarter, to 17.9-million barrels, on the back of unplanned domestic gas customer outage in Western Australia and the impact of Cyclone Claudia.

This was partially offset by production at the Cooper basin gas assets, which was the highest in nine years, driven by strong flow rates from new wells.

Sales volumes for the quarter declined by 7%, from 24.1-million to 22.3-million barrels, with sales revenue for the same period declining from more than A$1-billion to $883-million.

“Production levels from our current assets are relatively steady for the next four or five years without any new growth projects, and all our major capital projects are yet to take final investment decisions, providing for flexibility in commitment timing,” said Santos MD and CEO Kevin Gallagher on Thursday.

“Our disciplined, low-cost operating model continues to drive strong performance. Free cash flow generation from our portfolio of low-cost assets was $265-million in the first quarter. Our oil assets performed well with strong realised prices in the quarter, while our onshore assets performed particularly strongly, including the highest quarterly Cooper basin gas production in nine years, and Gladstone liquefied natural gas operating above guidance at 6.4-million tonnes a year.”

Gallagher said that for the remainder of 2020, around 70% of Santos’ forecast production volumes would be either fixed-price domestic gas contracts or oil hedged at an average floor price of $39/bl.

“The current environment is a time for discipline. We have a strong liquidity position with over $3-billion available and have sufficient headroom in our debt covenants for a number of years at current oil prices.

“The Covid-19 crisis continues to put demand pressure on industries across the globe and we are not immune. I remain confident our disciplined, low-cost operating model is built to see Santos through these challenging periods and today’s results are a strong base for us to build on as we fight current low oil prices and Covid-19,” Gallagher said.

Santos has maintained its 2020 production guidance at between 73-million and 80-million barrels of oil equivalent, but noted that sales volumes would likely be at the lower end of the guidance based on current business conditions and the projected impact of Covid-19.