Higher Prices Spark Santos Revival

By Glenn Dyer | More Articles by Glenn Dyer

Santos, Australia’s second-largest independent gas and oil producer, has joined rivals Woodside and Oil Search in revealing the benefit of the lift in global oil and gas prices late last year.

Santos reported a 14.3% rise in fourth-quarter revenue, thanks to a 28.4% rise in its average selling prices.

Full-year revenue rose 20% to $US3.1 billion ($A3.88 billion), with higher prices offsetting falls in production and sales. Production for the 12 months to December 31 fell 3% to 59.5 mmboe, and sales volume fell 1% to 83.4 mmboe, but still beat guidance of 79-82 mmboe. The higher revenue, along with sharp cost cuts, helped Santos cut net debt to $US2.7 billion from $US3.5 billion a year ago and the company says it is on course to cut it to $US2 billion by the end of next year.

Santos rejected one of those odd offers last August valuing it at $A9.5 billion takeover. The shares rose 1.1% to $A5.24, valuing the company at more than $A10.9 billion (and justifying the rejection of the bid).

Santos said revenue for the quarter ended December 31 rose to $US861 million from $US753 million a year earlier after 4th-quarter sales volumes and production remained flat at 21.8 million barrels of oil equivalent (mmboe) and 15 mmboe, respectively, Santos said in its December quarter report.

Santos maintained its production forecast range for 2018 of 55 mmboe to 60 mmboe, and provided 2018 sales volumes guidance of 72 mmboe to 78 mmboe.

The Adelaid said in November it expects to hold gas output steady over the next several years, with growth to kick off in 2023 from projects in northern Australia and Papua New Guinea.

"In 2017, our turnaround strategy to deliver a low-cost, reliable and high performance business progressed ahead of expectations," managing director and chief executive Kevin Gallagher said.

"Santos is now a stronger, more resilient company with the capacity to execute and bring on-line growth opportunities across its core long-life natural gas assets." Santos (like Oil Search) has a stake in the Papua New Guinea LNG project, run by ExxonMobil Corp, making it a takeover target by private equity-backed Harbour Energy, whose offer it rebuffed as too cheap.

The full year results will be out late in February.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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