Santos 1st Half Net Profit Falls by 32%

By David Winning

SYDNEY--Santos said its half-year net profit fell by 32% as a lower average price of its liquefied natural gas combined with a decline in production and sales volumes across its portfolio.

Santos said its net profit totaled US$790 million in the six months through June, down from US$1.17 billion a year ago. Underlying profit, which strips out some one-off items, fell by 37% to US$801 million.

Directors of the company declared an interim dividend of 8.7 U.S. cents, up 14% from a payout of 7.6 U.S. cents at the corresponding stage of 2022.

Santos produced 45.0 million barrels of oil equivalent in its fiscal first half, down from 51.5 million BOE a year earlier. Sales volumes dropped by 15% to 47.1 million BOE, contributing to half-year revenue falling by 21% to US$2.97 billion. Santos said its annual guidance is unchanged.

Santos last month said its LNG fetched an average price of US$13.24 per million British thermal units in the half, down from US$14.19/mmBtu a year ago when demand for sources of natural gas that could replace Russian supply surged following the Kremlin's invasion of Ukraine. In contrast, its domestic gas prices were higher on both the west and east coasts of the country.

Despite weaker operational metrics than a year earlier, Santos continues to generate significant cash that support larger returns for shareholders and help to fund an uptick in capital expenditure as it advances new projects, including the Pikka Phase 1 oil development in Alaska. Santos's free cash flow totaled US$1.13 billion in the first half.

Growth projects aim to cushion the impact of older developments reaching the end of their life. Santos has signaled to investors that the offshore Bayu-Undan natural-gas field, which has supplied the Darwin LNG plant on Australia's northern coast, will cease production later this year.

Still, the company has experienced some setbacks with its newest developments. Last year, a judge threw out a regulator's approval of Santos's environmental plan to drill for natural gas in the Barossa gas field after an indigenous leader on the remote islands argued Santos didn't properly consult his clan on its impact. That decision was later upheld on appeal.

Santos said on Wednesday that drilling operations at Barossa remain suspended pending assessment and acceptance of its new environmental plan by the regulator.

"Santos is also implementing the requirements of a General Direction from the regulator to further investigate potential First Nations underwater cultural heritage along the pipeline route," the company said.

Santos said the project is still on target to start production in the first half of 2025 and within current cost guidance, assuming that it can restart drilling by the end of this year.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 22, 2023 19:39 ET (23:39 GMT)

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