Santos today announced a 2016 first half net loss of US$1,104 million, impacted significantly by the previously announced impairment charge for GLNG of US$1,050 million after tax and lower oil prices.
Excluding impairments and other one-off items, the company recorded an underlying net loss of US$5 million after tax for the first half.
Managing Director and Chief Executive Officer Kevin Gallagher said: “When I joined the company in February, I said the first priority was to assess the company’s assets and deliver the appropriate organisational structure to ensure that Santos is sustainable in a low oil price environment.”
“Our goal is to be free cash flow breakeven at between US$35 to US$40 per barrel on a portfolio basis.
“We have made good progress in the first half towards this goal and are forecasting a free cash flow breakeven oil price of US$43.50 per barrel for 2016, down from US$47 per barrel.(1)
“The establishment of the new operating model for Santos will lift productivity and drive long-term value for shareholders in a low oil price environment. Our asset-focused model is supported by strong technical capabilities in exploration, development, production and commercial.
“The appointment of the new Executive team (Excom) was a key step in establishing the new operating model.
“Our progress is also evidenced by record production and significant cost reductions achieved in the first half: unit upstream production costs were down by 15% to US$8.80/boe and capital expenditure down by 58% to US$283 million.
“But there is still a lot of work ahead of us.
“Our near-term focus is clear: embed the new operating model, drive down costs and apply available cash flow to reduce debt.
“I am confident we are taking the right steps to ensure Santos becomes a strong and sustainable business,” Mr Gallagher said.
As previously announced, the company’s dividend framework provides for the setting of dividends as a payout ratio of underlying earnings. Consistent with the dividend framework and the company’s focus of applying available cash flow to debt reduction, the Board has resolved not to pay a dividend for the first half.
(1) Free cash flow breakeven is the average annual oil price at which cash flows from operating activities equals cash flows from investing activities. Forecast methodology uses corporate assumptions. Excludes one-off restructuring and redundancy costs and asset divestitures.