Summary
Santos profit increases to $170 million before write-downs
Santos profit increases to $170 million before write-downs
- First half profit up 2.2% before write-downs
- Net profit down 16.6% after write-downs
- 6.4% rise in sales revenue to $716.0 million
- Cash flow increased 35.6% to $421.7 million
- 350 PJ of gas commercialised in new contracts
- Leverage reduced to 25.3%
- 15 cents per share interim dividend
- Strong growth outlook
Santos Limited’s after-tax net profit increased 2.2% from $166.3 million to $170.0 million in the six months ended 30 June 2003 before write-downs of non current assets.
The higher profit was achieved on sales revenue that rose 6.4% to $716.0 million from $673.1 million.
Net profit after tax and write-downs declined 16.6% from $162.6 million to $135.6 million or 22.3 cents per share (24.8 cents per share in the previous corresponding period).
Steady 15 cent dividend
The Directors have declared a steady fully franked interim dividend of 15 cents per ordinary share.
Cash flow up 35.6%
Cash flow from Santos operating activities increased 35.6% to $421.7 million (up from $310.9 million) after interest and tax.
The higher cash flow is the equivalent of 72.3 cents per share (previously 53.6 cents).
Leverage (net debt to net debt plus equity) was reduced to 25.3% from 31.0% for the previous opening half.
Total savings in capital and operating expenditure reached $113 million, surpassing the $100 million target announced last February. This target has now been increased to $130 million by the end of 2003.
Total production costs fell by 4.1% to $131.0 million from $136.6 million in the 2002 first half. Production costs per barrel of oil equivalent (boe) fell from $4.93 to $4.89.
A period of significance – Managing Director
“This has been a period of significance for the Company, with progress on cornerstone projects and gas commercialisation having a major impact on the future face of the Santos group,” Santos Managing Director, Mr John Ellice-Flint, said today.
“Milestone developments during the half-year on our Bayu-Undan, Mutineer-Exeter and South East Asian projects should all translate into higher production for the Company within the next two to three years,” Mr Ellice-Flint said.
“The improved profit, before write-downs, and increased cash flow reflect a strong outcome from our key business units and reinforce the continuing underlying strength of the expanding group assets.”
Bayu-Undan
Mr Ellice-Flint said a highlight of the latest June half-year was the approval by the Timor Sea Designated Authority of the development plan for the US$1.5 billion Bayu-Undan LNG project in the Timor Sea in which Santos (10.6% interest) is the only Australian company involved. The LNG stage is due to be commissioned in 2006.
“This has firmly cemented Santos’ position on the world LNG market and we look forward with great anticipation to production from the first stage, the liquids recycle project, in April next year,” Mr Ellice-Flint said.
Mutineer-Exeter
Santos, as operator of the Mutineer-Exeter joint venture participants, also announced today that it had short-listed two contractors for major development work on the Mutineer-Exeter oil field, discovered last year in the Carnarvon Basin, offshore Western Australia.
A final decision is expected within the next couple of months on the letting of the major contract for the floating, production, storage and offloading (FPSO) vessel for the Mutineer-Exeter field.
Exploration
Mr Ellice-Flint said Santos 2003 oil and gas search represented a major shift from the Companys traditional low risk but less material exploration focus.
“It is not only one of our most diverse exploration programs but, for the first time, the majority of the wells are offshore and involve higher risk, but potentially higher reward targets,” he said.
Santos will drill 14 wildcat wells in the second half. They include wells in the offshore Otway Basin, Indonesia’s Kutei Basin and East Java.
Outlook
Mr Ellice-Flint said that the milestones achieved by the Company in the first half continued to strengthen Santos growth outlook.
“Production performance in 2003 and 2004 remains likely to be below that achieved in 2002. We expect production for 2003 to be around 54 to 55 million boe,” he said.
“However, new projects are being fast tracked and we are having success with opportunities to increase short-term production, such as the recent Legendre infill well.”
Mr Ellice-Flint said that the Company’s financial performance remained subject to oil prices and exchange rates.
“For the second half of the year, a US$1 movement either way in the oil price will affect Net Profit After Tax (NPAT) by A$6 million and a one cent change in the US dollar exchange rate will affect NPAT by A$3 million,” he said.
