Santos today announced third quarter production of 15.0 million barrels of oil equivalent (mmboe), 10% lower than the previous corresponding period and 4% lower than the second quarter of 2007.
This primarily reflects lower Cooper Basin gas production due to natural field decline, lower oil production from the Mutineer-Exeter field due to equipment failure which is expected to be rectified during the fourth quarter, and a planned 31 day shutdown of the Bayu-Undan field and associated processing facilities.
The 2007 full year outlook is for production of between 59 and 60 mmboe, which is within the previous guidance of 59 to 61 mmboe.
Total third quarter sales revenue of $627.2 million was in line with Q2 2007, although 17% below the previous corresponding period of Q3 2006, due to lower third party gas sales and the stronger A$/US$ exchange rate which resulted in an 5% decline in realised A$ oil prices.
The average realised gas price of $3.91 was a record for the company, and represented an increase of 7% over the past year. This reflects higher prices across Santos’ gas portfolio, including the impact of spot gas sales in eastern Australia during the quarter.
Commenting on the third quarter result, Santos’ Managing Director, John Ellice-Flint highlighted a number of planned activities to restore production rates during the fourth quarter.
“We are pleased that oil production from the Oyong field commenced in late September, with gross production of over 10,000 barrels per day achieved.”
“At Mutineer-Exeter, we currently have a rig on site and anticipate that if successful the appraisal and workover program during this quarter will increase gross oil production rates by between 5,000 and 10,000 barrels per day.”
“A key focus for Santos during the fourth quarter will be on improving the performance of the Cooper Oil Project, where production has been curtailed as a result of ongoing transportation issues related to wax build-up and the closure of the Moonie to Brisbane pipeline. Contingency planning to rectify these issues and restore production is well advanced, and we continue to expect to achieve net daily production of 14,000 bopd by the end of 2007.”
“The 2007 Cooper Oil drilling program has identified fewer development drilling opportunities within the areas initially targeted. As a result, the 2008 drilling program will be scaled back to a total of approximately 90 exploration, delineation and development wells. This will ensure that capital continues to be deployed effectively within our current infrastructure constraints, and will allow time for the project team to rebuild the inventory of future drilling opportunities.”
“Whilst the Cooper Oil production rate will increase from current levels, the lower 2008 drilling activity is expected to reduce the rate as compared with previous market guidance, with the actual outlook dependent on 2008 drilling outcomes.”
“Within our portfolio, we have a large number of organic growth projects in various stages of development, including domestic gas developments at Reindeer in Western Australia and Kipper and Henry offshore Victoria; an oil development planned at the Dua and Blackbird fields in Vietnam; and a number of high value LNG developments including Gladstone LNG and PNG LNG.
“Shifting our focus towards higher margin businesses, and monetising our contingent resource base of over 2.2 billion barrels of oil equivalent remains our priority, as successful execution of this strategy has the potential to add significant shareholder value.”
”We are pleased with the SA Government’s decision last week to introduce legislation to repeal the 15% shareholding cap. This is clearly a positive for the company and its shareholders. As a result, subject to Parliamentary approval, we will be in a position to continue to pursue the opportunities created by growing regional energy demand, but now on a level playing field with other listed companies.”
Other activities during and subsequent to the third quarter included:
- Formal conclusion of the Bayu-Undan field reserves re-determination process which confirmed an increase in Santos’ working interest in the Bayu-Undan LNG, LPG and condensate development from 10.6% to 11.4%.
- The commencement of Front End Engineering and Design (FEED) for the Reindeer gas field in the Carnarvon Basin, offshore Western Australia. The proposed production capacity is approximately 110 Terajoules per day of sales gas commencing in 2010.
- Ongoing monitoring of the Sidoarjo mudflow incident in the Brantas PSC in Indonesia (Santos non-operating 18% interest). A net provision of A$67 million (after recognition of insurance proceeds) was recorded in Santos’ accounts as at 31 December 2006 and was maintained unchanged at 30 June 2007.
- The onset of PRRT payments at the Mutineer-Exeter oil field at the end of the third quarter 2007 due to certain historical carry forward expenditure being disallowed. PRRT liabilities were previously assumed to commence in 2008. The total pre-tax guidance for PRRT and similar taxes across the Santos Group for the 2007 full year is now between $80 and $90 million, up from $30 million previously advised.
