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Santos Confident on Achieving Production Target despite Profit Drop

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Santos' full year net profit dropped by nearly a third, but the oil and gas producer remains optimistic about its ability to meet its production targets this year.

The company's net profit for the full year to Dec. 31, 2012, fell to $534.8 million (AUD 519 million), from $776.5 million (AUD 753 million). Santos explained in its earnings disclosure that in 2011, it made an exceptional gain on an asset sale.

Underlying net profit rose 34 percent to $625 million (AUD 606 million), driven by higher liquid volumes and gas prices.

Meanwhile, the company's oil production volume is up ten percent to 52.1 million barrels of oil equivalent.

"Production in 2012 was driven by new assets in Western Australia and Vietnam, and strong Cooper oil production. We expect a further lift in production this year," Santos' CEO, David Knox, said in a statement.

"Our liquefied natural gas (LNG) projects are poised to deliver significant shareholder value and remain on schedule with Papua New Guinea LNG on track for first LNG in 2014 and Gladstone LNG (GLNG) in 2015. Cost estimates for both projects are unchanged," Knox noted.

The company's main LNG project is the $19 billion (AUD18.5 billion) GLNG development on Queensland, which utilizes coal seam gas to LNG technology.

Santos disclosed in January this year that the production cost associated with GLNG blew out $53 million (AUD 50 million). At that time, Santos said GLNG’s production costs for 2012 were expected to be at $694 million (AUD 660 million), much higher than its previous cost guidance – issued in October last year – of $641 million to $673 million (AUD 610 million to AUD 640 million).

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