PERTH (miningweekly.com) – Oil and gas major Santos reported record production and sales volumes for 2016, which MD and CEO Kevin Gallagher on Friday described as a “year of significant change” for the Australia-based company.
The ASX-listed company produced a record 61.6-million barrels of oil equivalent in the year ended December, up 7% on 2015’s production and at the upper end of its guidance.
Sales volumes increased by 31% to 84.1-million barrels of oil equivalent, which Santos said was also a new record.
Fourth-quarter production reached 15-million barrels of oil equivalent, up 1% on the previous corresponding period and sales volumes for the December quarter increased to 21.9-million barrels of oil equivalent, up 27% on the previous corresponding period.
Liquefied natural gas (LNG) sales volumes also reached record highs of 2.8-million tonnes in 2016, up 89% on the previous corresponding period, following the ramp-up of the Gladstone LNG project, in Queensland, and strong performance from the Darwin LNG project, in the Northern Territory, and the Papua New Guinea LNG project.
Gallagher said Santos should be “proud of what was achieved” in 2016.
“We restructured the business, removed substantial cost and generated free cash flow for the first time in many years. Our production cost per barrel has reduced, and we are free cash flow positive below $38/bl, down from $47/bl at the start of 2016.”
He noted that in addition to the cost-out success, Santos also implemented a new organisation structure, which sought to maximise production, and developed a clear new strategy. The group also enjoyed exploration success in Western Australia and Papua New Guinea.
Furthermore, the company sold its noncore assets and strengthened its balance sheet for a lower oil price environment through an institutional placement completed in December.
“We enter 2017 with a clear strategy and a solid platform off which we can build and grow. Our business turnaround will continue as we reshape and focus our organisation to support five core, long-life natural gas assets: Cooper Basin, Gladstone LNG, Papua New Guinea, Northern Australia and Western Australian gas.
“This singular focus will also allow Santos to become a leaner, lower cost and high performance business with significant upside opportunities across our portfolio.”
For 2017, Santos expected sales volumes to reach between 73-million and 80-million barrels of oil equivalent, with production expected to reach between 55-million and 60-million barrels of oil equivalent.
The major is expected to spend between $700-million and $750-million in capital during 2017.