Santos Eyes Dorado Upgrade After Record Half

By Glenn Dyer | More Articles by Glenn Dyer

Unlike its peer, Woodside Petroleum (see separate story) which revealed a weak June quarter performance, Santos yesterday reported record gas production in the second quarter thanks to a solid performance across its Western Australia gas assets.

Production for the three months to June 30 rose to 18.6 million barrels of oil equivalent (mmboe) from 14.2 mmboe last year, the company said.

The shares ended down 1.7% to $6.92 as global oil prices dipped to two-week lows on continuing fears of oversupply this year and next.

Despite the strong June quarter performance, Santos has slightly trimmed the upper end of its 2019 sales and production forecast, while raising the lower end. Santos now expects annual sales of 90-97 mmboe and production of 73-77 mmboe.

Liquefied natural gas (LNG) prices have come under pressure after a mild winter in the northern hemisphere, especially China and Japan.

Sales for the period declined slightly from the first quarter, bringing in revenue of $US959 million. Santos said it also realised lower prices over the quarter.

The company said it expects to book a “significant” resource upgrade on its Dorado project in Western Australia.

“(The) Dorado-2 appraisal success confirmed a larger than anticipated major oil and gas resource in the Bedout Basin, offshore Western Australia, significantly de-risking a future development.

“Santos now expects to book a significant resource upgrade above its currently booked 2C resource for Dorado,” the company said yesterday. (2C resources are not quite as certain as 3C and need more proving up once production starts).

The first estimate suggests Dorado (the partner is Carnarvon Petroleum) contains an estimated at 171 million barrels of oil with a range of 82 to 32o million barrels. It also had 552 billion cubic feet of gas and 16 million barrels of condensate, or light crude oil.

Santos and Carnarvon currently are drilling three weeks in the area to prove up reserves (and are several smaller discoveries in the area) and to provide data for the development of the fields which are believed to be the largest discovered in Australia for some time.

A significant upgrade is also coming for the Moomba South field in South Australia: CEO Kevin Gallagher said “Following successful appraisal of Dorado and Moomba South, we expect to book significant resource and reserve upgrades respectively for these assets.”

And like Oil Search, Santos’ operations in Papua New Guinea (through a stake, with Oil Search, Total and Exxon Mobile in PNG LNG) may come under regulatory scrutiny after the region’s recently elected Prime Minister, James Marape, promised reforms to wealth distribution in the resources sector.

Santos recently bought into an Exxon Mobil-led field in Papua New Guinea that will help feed an expansion of Exxon’s PNG LNG project, in which Santos already has a stake.

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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