PERTH (miningweekly.com) – Oil and gas major Santo has reported a 39% increase in production during the first quarter ended March, compared with the previous corresponding period, as the company integrated assets from its ConocoPhillips acquisition.

First-quarter production reached 24.8-million barrels of oil equivalent during the March quarter, which was 2% below the production achieved in the December quarter, owing to lower domestic gas demand in Western Australia and unplanned maintenance at the Papua New Guinea (PNG) assets.

This fall in production from PNG was offset by strong production from the Bayu-Undan operations.

First-quarter revenue reached $964-million, up 5% on the previous quarter, despite a 12% decline in sales volumes, which reached 27.4-million barrels of oil equivalent.

During the quarter under review, Santos generated $302-million in free cash flow.

Santos MD and CEO Kevin Gallagher said Santos had delivered another strong quarter of production and sales volumes, and strong free cash flow, as the business benefited from higher commodity prices and a low free cash flow breakeven oil price.

This was despite the three-month lag in oil-linked liquefied natural gas (LNG) prices, which should see stronger prices in the second quarter.

“Our consistent and successful strategy combined with the disciplined, low-cost operating model continue to drive strong performance across our diversified portfolio. Free cash flow generation of $302-million in the first quarter demonstrates our diversification and leverage to oil price. We are currently forecasting more than $1-billion in free cash flow for the year at current oil prices,” he said.

“The strategy to grow around our five core asset hubs has not changed since 2016. As we now enter a growth phase with final investment decision (FID) on Barossa, we will remain disciplined in managing our major project costs, consistent with our operating model.

“It is a great achievement to have extended the life of Bayu-Undan following the approval of the infill drilling program and to have taken FID on the Barossa project less than a year after we completed the ConocoPhillips acquisition.”

Santos in March took a positive FID on the Barossa project, which will comprise a floating production, storage and offloading vessel, subsea production wells, supporting subsea infrastructure and a gas export pipeline tied to the existing Bayu-Undan-to-Darwin LNG pipeline.

First gas production is targeted for the first half of 2025, and will produce an average of 3.5-million tonnes of LNG a year.

“Last December we announced an ambitious roadmap to net-zero emissions by 2040. Our Moomba carbon capture and storage project is FID-ready, subject to eligibility for Australian Carbon Credit Units.

“First injection is expected to commence in 2024 and importantly this project represents a step-change in emission reduction,” Gallagher said.

Looking ahead at the full 2021 financial year, Santos is expecting production to reach between 84-million and 91-million barrels of oil equivalent, with sales volumes targeted at between 98-million and 105-million barrels.

Capital expenditure for major growth projects have been estimated at some $700-million, while base capital expenditure has been estimated at $900-million.