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Santos revenue slides despite record production

Business

South Australia’s largest company Santos has reported an 18 per cent drop in second-quarter revenue due to lower realised prices for its oil and gas, but said production from its core assets is expected to remain steady in the near term.

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The result comes despite Santos producing a record 20.6 million barrels of oil equivalent (mmboe) in the June Quarter, up 15 per cent on the previous three-month period.

Half year production was up 4 per cent to a record 38.5 mmboe.

The Adelaide-based oil and gas producer said sales revenue fell to $1.1 billion ($US785 million) in the June quarter from $US959 million in the same period last year. Sales revenue was also down $137 million (US$98 million), or 11 per cent on the March Quarter result.

Average realised prices for its LNG during the three-month period slid to $US8.27 per metric million British thermal unit (mmBtu), from $US9.09 per mmBtu a year ago.

Energy players have been hit this year by a global gas glut and sluggish demand, with the coronavirus pandemic bringing economic activity to a virtual halt.

Earlier this week, Santos flagged impairments of $1.1 billion, mostly on its Queensland-based Gladstone Liquefied Natural Gas (LNG) project, owing to a more than 10 per cent reduction in the company’s long-term oil price assumption.

Chief Executive Kevin Gallagher told the ASX that Santos’ diversified portfolio of fixed-price domestic gas revenues had cushioned the impact of lower oil prices.

“Production levels from our core assets are expected to remain relatively steady for the next five or six years, allowing us to continue to progress our major capital projects,” he said in a statement.

“As COVID-19 and the lower oil price continue to challenge us, we have remained resilient and kept production going, meaning our revenues have continued to flow.

“Our balance sheet is strong and we remain well positioned to leverage our growth opportunities when business conditions improve.”

Santos shares were up two per cent to $5.57 at 11am following this morning’s announcement.

The company’s share price reached $9 on January 15, its highest level since 2014 but plummeted in February and March to a low of $2.75 on March 19 before recovering some ground in recent months.

Santos was ranked No.1 in InDaily’s SA Business Index annual listing of South Australia’s top 100 businesses in 2019.

 – with AAP

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