Like the rest of its sector, Santos rode the rebound in global oil and gas prices in the June half compared to the depressed position prices and the sector found themselves in the June, 2020 half as Covid and the lockdowns slammed demand and prices sharply lower, triggering asset write downs at Santos and its peers.
Santos said reported net profit after tax for the six months to June totalled $US354 million including net gains on asset sales.
Santos said it was “significantly higher than the corresponding period mainly due to impairments included in the previous half-year result.”
Underlying profit of $US317 million followed higher oil prices compared to the corresponding period “due to recovery in demand”.
But Santos said the favourable impact of the rise in oil prices was “offset by lower average LNG prices due to lagged oil-linked pricing in long-term LNG offtake contracts.”
The lag effect kicks in this half with a sharp rise in LNG linked prices and earnings which will continue into the first half of 2022 as gas prices currently are above previous levels.
Santos had previously confirmed record production of 47.3 million barrels of oil equivalent (mmboe) and record sales volumes of 53.8 mmboe.
Santos will pay an interim dividend of 5.5 US cents a share fully-franked, 162% above the June, 2020 interim dividend which was depressed by low demand and prices.
The company said the latest dividend equates to 20% of first half free cash flow, “in-line with the company’s sustainable dividend policy which targets a range of 10 per cent to 30 per cent payout of free cash flow.”
In Tuesday’s statement Santos CEO Kevin Gallagher said Santos delivered record production and sales volumes in the first half of 2021, and strong free cash flow of US$572 million despite lower average LNG prices.
“These results again demonstrate the resilience of our cash-generative base business and strong operational performance across our diversified asset portfolio,” he said.
The next big deal for Santos and its shareholders is the $21 billion marriage to Oil Search.
