Santos Raises Dividend Despite Annual Profit Fall — Update

By David Winning

SYDNEY--Santos reported a 33% fall in annual profit on the back of lower production and sales revenue, concluding a challenging year that included a legal challenge to its key Barossa growth project and merger talks with Woodside Energy that ultimately went nowhere.

Santos said its net profit totaled US$1.42 billion in the 12 months through December, down from US$2.11 billion a year ago. Underlying profit, which strips out some one-off items, fell by 42% to US$1.42 billion.

The company's annual sales revenue fell by 24% to US$5.89 billion, partly due to its liquefied natural gas and crude oil fetching lower prices than in 2022, while it generated US$2.1 billion of free cash flow. Directors of the company declared a final dividend of 17.5 U.S. cents a share, up from a payout of 15.1 U.S. cents a year earlier.

Santos finds itself at a critical juncture as its share price struggles for momentum, despite the global energy sector getting tailwinds from the Ukraine war and instability in the Middle East. Santos says it is studying ways to accelerate value for shareholders, prompting analysts to speculate it could sell more of its interest in the PNG LNG facility in Papua New Guinea or separate its LNG assets from its Australian oil business.

"Today's results demonstrate the capability of Santos to generate strong cash flow, develop major projects and deliver sustainable shareholder returns," said Chief Executive Kevin Gallagher.

Earlier this month, Woodside and Santos called off early stage discussions over a merger that would have created a global gas giant worth some $57 billion. Santos said the companies had exchanged some information, but there weren't enough benefits to justify a deal to its own shareholders.

A major drag on Santos's stock has been slow progress in developing the Barossa natural-gas field off Australia's northern coast following a legal challenge. In September 2022, a judge threw out a regulator's approval of Santos's environmental plan to drill for natural gas there after an indigenous leader on the remote islands argued Santos didn't properly consult his clan on its impact.

Santos's revised environmental plan was accepted by the regulator in December, and drilling has restarted at the project, which is two-thirds complete. Still, the delay contributed to Santos raising a cost estimate on the project by up to US$300 million while forecasting first gas output in the third quarter of 2025. It now estimates the project will cost US$4.5 billion-US$4.6 billion to develop.

Santos reiterated on Wednesday that it expects to produce between 84 million and 90 million barrels of oil equivalent this year, down from 91.7 million BOE in 2023. It has also forecast sales volumes of 87 million-93 million BOE, compared with 96.4 million BOE a year ago.

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

(END) Dow Jones Newswires

February 20, 2024 17:24 ET (22:24 GMT)

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