No dividend, again for Santos shareholders as the oil and gas group produced a first-half underlying profit, helped by stronger oil and gas prices and lower production costs.
The company continues to pay down debt as it raised the outlook for oil ad gas production for the year to December 31. But it held off on reinstating a dividend as it focuses on paying down debt.
Santos, which cut net debt in the first half to $US2.9 billion from $US3.5 billion at the end of 2016, said it would continue to focus on reducing debt further so there would be no payout to shareholders.
Santos now expected to sell between to 77 million to 82 million barrels of oil equivalent (mmboe) up from the earlier forecast of 75-80 mmboe.
The company said underlying profit of $US156 million for the six months to June 30 was its biggest since the first half of 2014, and compared with a loss of $US5 million a year ago.
The profit was better than market forecasts of around $US130.2 million.
But because of those impairment losses announced earlier this month, the company reported a net loss of $US506 million ($A640 million). The culprit was the $US690 million write down of the value of the Gladstone LNG project in central Queensland. That (like Origin Energy’s impairment loss) was driven by Santos cutting its oil price estimates for the rest of the year.
But despite that, the bottom line loss improved from $US1.1 billion in 2016.
“Our forecast free cash flow breakeven for 2017 sits at US$33 per barrel and we generated US$302 million in free cash flow in the first half. This is pleasing progress towards our goal of transforming Santos into a low-cost, reliable and high performance business with a strong portfolio that can generate significant free cash flow in a low oil price environment,” CEO Kevin Gallagher said on Thursday.
Santos, whose biggest shareholder is China’s ENN Ecological Holdings Co with private equity partner Hony Capital, has been trying boost gas sales into the local market this year to fend off potential federal government restrictions on its liquefied natural gas exports from 2018.
The Turnbull government has put in place new rules to restrict exports of LNG to ease rising energy prices for local consumers.
GLNG, in which Santos has a 30% stake is seen as the most vulnerable to cuts of the three central Queensland LNG export projects.
“In the coming months, Santos expects to announce further domestic supply contracts to support the federal government’s efforts to deliver affordable and reliable energy to households and industry,” Mr Gallagher said on Thursday.
