Santos' Underlying 1H 2014 Net Profit Up 3% YOY to $240M

Australia's Santos Ltd. posted an underlying first half (1H 2014) profit of $240.3 million (AUD 258 million), 3 percent more than the same period last year, with the gains due to an earlier-than-expected start-up of the PNG LNG project in Papua New Guinea (PNG), the company said in its half-year financial results Friday.

Sales revenue increased 25 percent in 1H 2014 to a record $1.757 billion (AUD 1.887 billion), lifted by higher oil and liquefied natural gas (LNG) sales volumes as well as higher oil and gas prices although this was offset by the previously announced non-cash impairment of the firm’s Indonesian coal-seam gas assets, and higher cost of sales, exploration expense and net finance costs.

Production volume was 2 percent higher in 1H 2014 to 25.0 million barrels of oil equivalent (MMboe), compared to 24.5 MMboe last year, while sales volume rose 5 percent to 28.9 MMboe, up from 27.4 MMboe. Santos maintained its 2014 production guidance of 52 to 57 MMboe, with the PNG LNG project, which reached full production capacity in late July, expected to contribute to stronger production performance in 2H 2014.

“The first half of 2014 saw Santos achieve its highest oil production in six years, record sales revenue and strong operating cash flow,” Managing Director and CEO David Knox said in a press release.

Meanwhile, the Gladstone LNG (GLNG) project is over 85 percent complete and remains on track for first LNG in 2015. Upstream drilling for the project is ahead of schedule and two of the three upstream hubs have been handed over for commissioning and construction of the third is almost complete. Commissioning of the 261 mile (420 kilometer) transmission pipeline is underway and first commissioning gas is planned for delivery to the LNG plant in the fourth quarter of 2014 (4Q 2014). 

Construction of LNG trains, tanks and supporting infrastructure is also progressing well at GLNG projects' Curtis Island LNG plant site. All Train 1 modules have been set on their foundations and work continues on cable pulling and piping hook-up. Seventeen of the 29 Train 2 modules have also been set on foundations and the final module is expected to arrive on Curtis Island in September. Hydro-testing of the first LNG tank is complete and construction continues to progress well on the second tank and LNG loading jetty. 

Over in Malaysia, Santos revealed that it has farm-in to the 221.6 square mile (574 square kilometer) Block S, located approximately 74.5 miles (120 kilometers) north west of Kota Kinabalu, offshore Sabah in water depths of between 656 feet and 4,921 feet (200 meters and 1,500 meters). Partners in Block S, including Inpex Corp. and Petronas Carigali Sdn Bhd., plans to drill the first exploration well in 4Q 2014.

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