After revealing impairments of $1.1 billion earlier this week, Thursday’s June quarter production report from Santos was always going to be a bit of a flat affair.
Investors thought differently, sending the shares up nearly 3.5% to $5.65 in an act of hope after a small rise in world oil prices.
The actual details of the Santos report made for gloomy reading.
They included an 18% drop in second-quarter revenue due to lower its oil and gas prices following the massive collapse in April and fitful recovery since then.
That was despite record production of 20.6 million barrels of oil equivalent (mmboe) in the June quarter, up from 18.6 mmboe June quarter of last year, (and up 15% from the three months to March) helped by higher output across its Western Australia operations.
Half-year production was up 4% to a record 38.5 mmboe.
Santos said its “disciplined operating model continues to drive strong onshore performance – first half Cooper Basin and Queensland equity gas production was up 18% and 5%, respectively.”
“Initial results from horizontal wells in the Cooper Basin are promising,” the company said yesterday.
Santos said sales revenue fell to $US785 million in the June quarter from $US959 million a year earlier.
That saw half-year revenues fall 16% to $US1.7 billion.
Average realised prices for its LNG during the three-month period slid to $US8.27 a metric million British thermal unit (mmBtu), from $US9.09 per mmBtu a year ago.
Earlier this week, Santos revealed impairments of $1.1 billion, mostly on its Queensland-based Gladstone Liquefied Natural Gas (LNG) project, owing to a more than 10% reduction in the company’s long-term oil price assumption.
Woodside, Origin, and Oil Search have all made similar impairment write-downs because of lower expectations for future oil prices.
“Production levels from our core assets are expected to remain relatively steady for the next five or six years, allowing us to continue to progress our major capital projects,” CEO Kevin Gallagher said in Thursday’s report.
That saw Santos trim its annual production forecast to between 83 mmboe and 88 mmboe, from its earlier range of 81 mmboe and 89 mmboe.
Santos said it had liquidity of over $$3 billion at the end of the quarter, comprising $US1.3 billion in cash and $US1.9 billion in committed undrawn debt facilities
