14 Aug 2002
Santos Limited (ASX: STO, NASDAQ: STOSY) today announced an after-tax profit of $163 million, or 25 cents per share, for the six months ended 30 June 2002.
The result compared with the record $252 million in the previous corresponding period which included sharply higher world oil prices.
Interim dividend has been maintained at 15 cents per share.
Santos Managing Director, Mr John Ellice-Flint, said:
This is a very solid first half result notwithstanding the lower world oil price, which is obviously a factor outside of our control, and increased depletion charges. However we are making good progress in the areas we can control such as production, costs and exploration.
He said after-tax profit in the current second half was on track to exceed the $163 million first half result.
Mr Ellice-Flint said the lower profit for the opening six months was due to:-
- The significantly lower average realised oil price of A$40.40 per barrel (down from A$51.10 per barrel in first half of 2001), which has driven global oil and gas company profits lower in the June half year, and
- Previously announced higher non-cash depletion charges, resulting from the across-the-board revision of Santos' reserves at year-end 2001 to bring them into line with international industry practice.
Mr Ellice-Flint said the timing of the revised reserves and resultant depletion charges in the 2001 second half, had distorted comparisons with the 2001 first
half profit but would not affect comparisons of the 2002 full year result with 2001.
The most accurate gauge to the groups underlying performance - earnings before interest, tax, depreciation and amortisation (EBITDA) - was $484 million compared with $566 million in the first half of 2001.
Reflecting 4.5% growth in our latest first half production, the 14.5% lower EBITDA compares with a 20.9% decline in the average realised oil price.
Similarly, Santos cash flow remained strong during the latest June half.
Cash flow from operating activities after interest and tax increased by 17% to $299 million (52 cents per share).
Underlying performance improvements of $39 million were achieved, well on track to achieve the target of $50 million by the end of 2003 and cash costs per barrel produced were down 3%.
Steady interim dividend
Santos Chairman, Mr Stephen Gerlach, said Directors had declared an interim ordinary dividend of 15 cents per share, fully franked - the same level as in 2001.
The dividend will be paid on 30 September 2002 to shareholders registered in the books of the Company at the close of business on 9 September 2002. In accordance with the terms of issue, a dividend amount of $3.2940 per Reset Convertible Preference Share (fully franked) will be made on 30 September 2002 to holders registered in the books of the Company at close of business on 9 September 2002.
Mr Gerlach said the steady dividend had been declared following another strong group performance, with growth targets being met and exploration success on the rise.
"The factors driving performance that are within our control, such as production, costs and the depth of our exploration and development options, all showed pleasing improvement, he said.
On track and achieving results
Mr Ellice-Flint said the Companys overall strategy was firmly on track and achieving results.
He said exploration success was a highlight of the latest first half and would deliver meaningful future growth.
Our good exploration results in the June half included the Mutineer and Exeter oil discoveries in the Carnarvon Basin and discoveries in East Java (Indonesia) and South Texas (US), he said.
These discoveries will be followed up in the second half.
Mr Ellice-Flint said the Company made progress on commercialisation of its substantial reserves in northern Australia during the first half. Six development wells were drilled for the Bayu-Undan liquids project and the wellhead platform was installed. There was also further progress on commercialisation of Bayu-Undan gas.
The integration of Esenjay Exploration Inc, the company recently acquired in the US, is progressing smoothly, he said.
Santos in good growth position
Mr Ellice-Flint said that subject to any dramatic change in current oil price levels and exchange rates, Santos expected its second half profit to exceed the $163 million first half result.
Oil price and exchange rate factors are outside the Companys control but the recent strength in oil prices and the weaker Australian-United States exchange rate are both favourable for the full year result, he said.
Underpinning the Santos full year result will be higher production and we are already in a good position to achieve our 3% production growth target for 2002.
New exploration plans announced
Mr Ellice-Flint said that in line with the Companys growth strategy, Santos had decided to expand its original 2002 oil and gas exploration program.
Our wildcat exploration program for the year is being increased from $117 million to a record $140 million, following the Companys first half exploration successes and savings in other capital programs, he said.
The initial program of 17 wildcat exploration wells for the current calendar year has now been lifted to 23 wells to be drilled in Australia and overseas.
The wildcat exploration program will accelerate, with 17 wells to be drilled in the current December half in the Carnarvon Basin (Western Australia), the offshore Otway Basin (Victoria), onshore Australia, Papua New Guinea and South Texas (USA).
We are also increasing the full year delineation budget to $100 million to fund the rapid appraisal of first half discoveries.
The Analyst Presentation on the Results will be available from 14 August on the Santos website www.santos.com
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