Santos hits production and sales record

DISCIPLINED capital expenditure and advancement of major projects have left oil and gas producer Santos in an enviable position, according to the company’s first half results released this morning.
Santos hits production and sales record Santos hits production and sales record Santos hits production and sales record Santos hits production and sales record Santos hits production and sales record

Santos boss Kevin Gallagher speaks at APPEA 2019 Conference.

Paul Hunt

Senior Journalist: Oil & Gas, Policy.

Paul Hunt


Over the first six months Santos' production hit a record for the company, reaching 37 million barrels of oil equivalent, a whopping 32% increase for the corresponding period.

The Adelaide-based company said sales volumes of 45.2MMboe were up 19% and revenues up 18% to $2 billion in the first half, but noted second quarter sales volumes were lower than the first quarter due to timing of LNG and liquids shipments.

Production for the three months to June, alone, hit 18.6MMboe, up from 14.2MMboe the previous year. However, this was down 5% on the quarter ending March 30.

While production was up, the company did notice it was down on expectations due to maintenance at its Cooper Basin assets and the PNG LNG project.

"With this maintenance activity now mostly behind us, we currently expect stronger production in the second half," Santos chief Kevin Gallagher said.

Sales brought in $300 million in free cash flow in the second quarter, taking total free cash flow for the first half to more than $600 million. This means the company has delivered positive cash flow for no fewer than 13 consecutive quarters.

 "These cash flows underpin our brownfield growth strategy where we hit a number of significant milestones during the quarter, including farming-in to P'nyang and awarding the subsea contract for Barossa," Gallagher said.

The company recorded an average realised oil price of $75.26 per barrel for the second quarter, a 9% increase on the $68.90/bbl in the first three months of the year. This was largely due to higher quality crudes from the company's WA and Cooper Basin assets, which commanded a stronger premium.

Santos expects output to increase thanks to assets in Western Australia it gained through its acquisition of Quadrant Energy last year when it picked up the massive Dorado oil discovery.

"The successful integration of our Western Australian business has exceeded expectations," Gallagher said.

"Following successful appraisal of Dorado and Moomba South, we expect to book significant resource and reserve upgrades respectively for these assets."

Dorado joint venture partner Carnarvon Petroleum (20%) announced this morning the second appraisal well Dorado-3 would be spud in the coming weeks.

Santos said production guidance has fallen from previous expectations of 90-97MMboe to 73-77MMboe.

Guidance for oil and gas production has also been lowered to US$7.25-$7.75/boe from US$7.50-$8/boe.

Santos was down 71.7% at $6.91 today. It has a market cap of $14.6 billion.