Santos Sees Writedowns as Sales Slump 24% Amid Oil Collapse

(Bloomberg) -- Santos Ltd. reported a 24 percent drop in fourth-quarter sales and flagged asset writedowns after a further decline in oil prices since its November announcement of a A$3.5 billion ($2.5 billion) program to cut debt.

Quarterly sales fell to A$828 million from A$1.09 billion a year earlier, the Adelaide-based company said Friday. That beat estimates from UBS Group AG and Macquarie Group Ltd. Output dropped 1 percent to 14.9 million barrels of oil equivalent, and spending decreased 43 percent to A$477 million.

Australia’s third-biggest oil and gas producer has struggled amid a collapse in crude prices and has joined companies including Origin Energy Ltd. in taking steps to shore up its balance sheet. Santos said it had A$4.8 billion in cash and committed undrawn debt available at the end of last year.

“Santos has access to plenty of liquidity to ride out an extended period of lower oil prices in our view,” Nik Burns, a Melbourne-based analyst at UBS, wrote in a note Friday.

Santos rose 9.4 percent to A$2.80 as of 1:05 p.m. in Sydney trading, the most since October, while Australia’s benchmark index climbed 1.1 percent.

Santos said in November that it expected writedowns of as much as A$3.4 billion for 2015. Rival Woodside Petroleum Ltd. said yesterday it expected writedowns of as much as $1.2 billion.

“The company expects to book reductions to both asset carrying values and reserves as part of finalizing its 2015 full-year financial accounts,” Santos said in the statement. Santos reports its results next month, soon after Kevin Gallagher is due to replace David Knox as chief executive officer.

Santos in October rejected a $5.2 billion takeover bid from Scepter Partners.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net Andrew Hobbs, Jake Lloyd-Smith

Copyright 2016 Bloomberg News.

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