JOHANNESBURG (miningweekly.com) – Oil and gas developer Santos on Friday reported disappointing results, with a first half net loss of $1.1-billion, impacted significantly by an impairment charge for the Gladstone liquefied natural gas (GLNG) project of $1.05-billion after tax and lower oil prices.

The company earlier said it was writing down the value of its GLNG project, in Queensland, owing to low oil and gas prices. Santos said that during the course of this year, there had been a slower ramp-up of GLNG equity gas production and an increase in the price of third party gas.

This caused the Australian LNG operator to adjust its upstream gas supply and third party gas pricing assumptions for GLNG.

Excluding impairments, the company recorded an underlying net loss of $5-million after tax for the first half.

However, despite the setback, the company still reported record production of 31.1-million barrels of oil equivalent, on the back of the start-up of GLNG liquefaction trains 1 and 2.  This was a 10% increase from the prior year’s 28.3-million barrels of oil equivalent, while its sales also experienced a 32% increase to 40.9-million barrels of oil equivalent.

Despite the increase, Santos’s sales stood at $1.19-billion, a 6% decrease from the prior year, owing to the weaker prices.

“Our goal is to be free cash flow breakeven at between $35/bl to $40/bl 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 $43.50/bl for 2016, down from $47/bl,” Santos MD and CEO Kevin Gallagher enthused.

He added that the establishment of a new operating model for Santos would lift productivity and drive long-term value.

“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 $8.80 per barrel of oil equivalent and capital expenditure down by 58% to $283-million. But there is still a lot of work ahead of us,” he noted.