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Santos production falls in Q1

Santos production falls in Q1

Photo by Bloomberg

19th April 2018

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Planned maintenance has seen oil and gas major Santos’ first-quarter production decline by 1.2-million barrels of oil equivalent, compared with the previous quarter, to 13.8-million barrels of oil equivalent.

The ASX-listed major told shareholders on Wednesday that planned maintenance in Moomba and in Queensland, as well as the temporary outage of the Papua New Guinea liquefied natural gas (PNG LNG) project, following a major earthquake in February, had affected production.

The PNG LNG project restarted production ahead of forecast.

Santos has now updated its production expectations to between 55-million and 58-million barrels of oil equivalent, down from the 55-million to 60-million barrels of oil equivalent previously forecast.

“Santos’ first-quarter results highlight the benefits of a diversified portfolio of natural gas assets, underpinned by a disciplined operating model focused on cash generation,” said MD and CEO Kevin Gallagher on Thursday.

During the quarter under review, Santos sold 18.9-million barrels of oil equivalent, down from the 21.8-million barrels sold in the previous quarter, to generate revenues of $794-million.

Sales volumes during the first quarter were impacted by lower sales from PNG LNG, combined with lower third-party sales revenue from the Gladstone LNG project.

This was partially offset by higher commodity prices.

“In the first quarter of 2018, we generated A$246-million in free cash flow, reduced net debt by 8% to A$2.5-billion and maintained our 2018 forecast free cash flow breakeven at around $36/bbl, despite the significant increase in drilling activity in Queensland and the Cooper basin, and the temporary shutdown in PNG following major earthquake activity.”

Gallagher said that this clearly demonstrated the resilience of Santos’ diversified portfolio of core assets, with the company now beginning to enjoy the sustained benefit of its low cost, high efficiency operating mode, with strong free cash flow generation further strengthening the balance sheet, and setting Santos up for future growth.

“As a result of our strong cash flows that enabled net debt to be reduced by a further 8% to A$2.5-billion over the quarter, Santos is now set up to reap the benefits of higher oil prices and continue to build value for our shareholders.

“If current oil price levels continue throughout 2018, then we will achieve our end-2019 net debt target sometime in the second half of 2018, more than a year ahead of plan,” Gallagher said.

Santos in April received a A$13.5-billion takeover offer from energy investor Harbour Energy, which was offering Santos shareholders $4.98 a share.

Gallagher told shareholders on Thursday that the company would now engage with Harbour on its proposal to determine whether an offer that is capable of recommendation by the Santos board, could be developed.

Edited by Creamer Media Reporter

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