Australian oil and gas company Santos has reported a record production volume in the first half of 2020, and expects a stronger second-half due to its ConocoPhillips assets acquisition.
The independent producer pumped 38.5 million barrels of oil equivalent (Mmboe) in the first six months of the year, compared with 37 Mmboe in 1H19, Kallanish Energy reports.
The growth was driven by increased equity in Bayu-Undan production following completion of the northern Australia and Timor-Lest asset acquisition in May, and higher domestic gas production in Western Australia due to the commencement of the Alcoa contract in mid-June.
The latter is also expected to help boost production volumes in the second-half to around 44.5-49.5 Mmboe. Overall, Santos forecast full-year production at 83-88 Mmboe.
In the first-half, the company had 43% of its production sold under fixed-price, domestic gas contracts. 41% were liquefied natural gas (LNG), liquids and gas, and 16% of the production volumes were of hedged oil.
Most of the LNG volumes were sold under long-term contracts, with only 7% sold into spot market. The fixed-price, inflation-linked domestic gas contracts provided Santos with stable revenues, cushoning the negative impact of lower oil and gas prices.
In the second-half, around 60% of its planned production is either fixed-price domestic contrasts or oil hedged. Some 9.7 million barrels of oil are hedged at an average floor price of $38/barrel.
The company reported a net loss after tax of $289 million, compared to a net profit of $388 million a year earlier. The financial results have also been impacted by non-cash impairment due to revised oil price assumptions, previously reported.
“Our balance sheet is strong with over US$3 billion in liquidity and we remain well positioned to leverage our growth opportunities when business conditions improve,” said CEO Kevin Gallagher.
Santos also said that amid the ongoing uncertain economic impact of Covid-19, combined with the lower oil price environment, the board decided it was “prudent” to set the interim dividend at the lower end of the target payout range.
The directors will review the payout again when it considers the final dividend in February.
“Santos remains confident that when prices and demand recover, our projects will be better placed than those in our competitor countries to leverage the opportunities that will inevitably re-emerge.
“We are also progressing FEED work for the Moomba carbon capture and storage project, which has the potential to significantly reduce emissions and be an enabler for the production of hydrogen in the future,” Mr Gallagher said.
Fixed price domestic gas contracts and strong realised LNG prices shielded first half revenues from lower oil price
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