PERTH (miningweekly.com) – Australian oil and gas major Santos has reported an 82% fall in net profits after tax to A$37-million for the half-year ended June, as oil prices tumbled and exploration expenses soared.

Profit was down from A$206-million in the previous corresponding period.

Production volumes for the interim period were up 13% year-on-year to 28.3-million barrels of oil equivalent, while sales volumes were up 7% to 30.9-million barrels of oil equivalent.

However, with the fall in the oil price, sales revenue for the period under review fell 15%, from the A$1.88-billion reported in the first half of 2014, to A$1.61-billion, as the average realised oil price declined from $115/bl to $60/bl.

MD and CEO David Knox said the company had responded both effectively and quickly in 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 cost per barrel by 11% to A$13.70/bl of oil equivalent.”

Knox pointed out that Santos also continued to take appropriate steps to further reduce costs and was working closely with suppliers and contractors towards that end. The company had also flagged that it was considering asset divestment as part of its ongoing portfolio management, provided fair long-term value could be realised.

“Tightly managing costs will continue to be a key focus as we work through the current oil price environment,” he said.

The 2015 exploration programme was also weighted towards the first half of the year and resulted in exploration expenditure of some A$194-million.

For the full financial year, Santos expected to produce between 57-million and 64-million barrels of oil equivalent.

Meanwhile, Knox on Friday announced that he would retire as MD and CEO once a successor was appointed.

After seven years at the helm of the company and, with the Gladstone liquefied natural gas project on the cusp of production, Knox and the Santos board agreed that it was an appropriate time to institute a succession of leadership.

Further, Santos would also conduct a full strategic review to examine options to restore and maximise shareholder value, considering the continued fall in oil prices and recent approaches from third parties concerning various Santos assets and possible strategic opportunities with the company.

Santos chairperson Peter Coates would assume the role of executive chairperson and take over executive responsibility for conducting the strategic review.

“Santos has built and secured some high-quality assets and resource positions. We need to protect that value while also achieving far better market recognition of it than shareholders are seeing today,” he said.

“We will be talking with the parties who have approached us to date with interest in various assets and other strategic initiatives and, with this announcement, there may well be new expressions of interest received,” he added.

“No options will be ruled out from consideration, and neither is any particular option a preferred course at this time.”