Santos today announced a half-year net profit of $37 million after tax, 82 per cent lower than the previous first half, reflecting significantly lower oil prices and a higher exploration expense.
The half-year results were also highlighted by improvements in production and significant cost reductions across the business.
Strong operational performance - particularly from PNG LNG and Darwin LNG – saw Santos record production growth of 13 per cent compared to last year. However, the lower realised oil prices resulted in sales revenue declining by 15 per cent.
The average realised oil price was US$60 per barrel for the period, compared to US$115 in the previous first half – a 47 per cent reduction.
Santos Managing Director and Chief Executive Officer David Knox said that the company had responded both effectively and quickly to the lower oil price environment, delivering significant reductions in costs across the business and improving its productivity.
“Capital expenditure for the first half was 55% below 2014 levels and we cut the production costs per barrel by 11% to A$13.70 per barrel of oil equivalent,” Mr Knox said.
“We have been and continue to take appropriate steps to reduce costs further. We are also working closely with our suppliers and contractors towards that end. I am pleased to say we are on track to deliver our 2015 target of $180 million in gross supply chain savings.”
“Tightly managing costs will continue to be a key focus as we work through the current oil price environment.”
“We have again delivered strong operational performance including higher production and sales volumes thanks to good performance from our LNG assets and stronger Cooper Basin gas production.”
“However, the bottom line result reflects the impact of the severe decline in oil prices compared to the previous first half, along with a higher exploration expense.”
The 2015 exploration program was weighted to the first half and resulted in exploration and evaluation expense of $194 million. The campaign of drilling in PNG and Malaysia produced the successful Bestari-1 oil discovery offshore Malaysia but did not result in other commercial finds.
Santos also reported that it had brought gas into its LNG Train 1 at GLNG, demonstrating the significant progress made on the project during the first half.
Other GLNG milestones achieved include bringing all major upstream processing facilities on line, completing commissioning of all LNG facility power generation and other utilities, unloading of the propane and ethylene refrigerant into storage and commissioning all six LNG Train 1 refrigeration compressors.
Over the coming weeks, the GLNG team will start up Train 1’s “front end” pre-treatment units before chilling down the “cold end” refrigeration units to make LNG.
Mr Knox confirmed that the GLNG project remained on track to deliver first LNG around the end of the third quarter. “This project is progressing extremely well. GLNG’s upstream facilities are fully operational and we are in the final stages of commissioning on Curtis Island,” Mr Knox said.
Santos retains a robust funding position with approximately $2.2 billion in cash and undrawn debt facilities available at the end of June.
The Board has resolved to pay an interim dividend of 15 cents per share fully franked. The dividend reinvestment plan (DRP) will be in effect for the interim dividend and will be fully underwritten. DRP shares will be issued at a 2.5% discount.
All guidance for 2015 is maintained.