Santos Says Second Quarter Production Lower

Santos Limited reported lower June 2004 quarter production, sales volumes and revenues, despite significantly improved results compared with the March quarter.

Total development spending for the quarter, however, was a record $175 million as the Company moves quickly to bring new projects online, such as Mutineer-Exeter and John Brookes, to increase future production.

Total production for the three months ended 30 June 2004 was 11.6 million barrels of oil equivalent (mmboe) compared with 13.8 mmboe in the previous corresponding period. Sales volumes were down from 13.8 mmboe to 12.0 mmboe.

The average oil price for the quarter increased by 23% to A$50.65 per barrel compared with the second quarter of 2003.

This largely offset the impact of lower volumes and resulted in sales revenue of $334.1 million compared with $347.4 million in the June 2003 quarter.

"The lower second quarter production was due mainly to the impact of the Moomba plant incident and declining field performance from fields in Western Australia and Victoria," said Santos' Managing Director, Mr. John Ellice-Flint.

"The Moomba plant reinstatement continues to progress well. Recovery of losses in the second quarter is included in the Company's insurance claim, which is currently in progress.

"There have been production challenges in two of our non-operated fields offshore Western Australia," he said.

While gas production from the East Spar gas field was higher than in the June 2003 quarter, the field has experienced earlier than expected water breakthrough. The production shortfall will ultimately be offset with the development of the John Brookes gas field, but production during the second half of 2004 will be lower than previously forecast.

The Stag oil field has experienced unanticipated well downtime resulting in poorer field performance. A remedial program is being developed. Full year 2004 production from Stag is expected to be lower than previously forecast. Partly offsetting these negative effects, the acquisition of Novus Petroleum assets is expected to add around 0.8 mmboe to 2004 production, depending upon the precise date of the completion of the deal.

"Taking these factors into account, together with the recent divestment of onshore Otway assets, the current outlook for 2004 production is 4546 mmboe," he said.

"One of our major priorities during the quarter has been the rapid development of new projects on which we have spent a record $175 million."

Significant progress on growth projects during the second quarter 2004 included:

  • The Bayu-Undan liquids project (offshore Darwin) which this week completed the most technically difficult of the field's development wells. Field development is three months ahead of schedule.

  • The Mutineer-Exeter oil field development (offshore WA) where the project has passed the 55% completion point within budget. The first planned heavy lift activity was recently completed with the successful installation of the moonpool structure to the Floating Production Storage and Off-take vessel. All 12 planned lifts should be complete by the end of September.

  • The Casino gas field development (offshore Victoria) where development approval is expected within the next month.

  • The John Brookes gas field project (offshore WA) for which new contracts, plus additional volumes to meet East Spar obligations, are sufficient to accelerate development of this field. Development has been approved by the JV following recent successful appraisal.

  • The June quarter also saw the addition of further possible growth opportunities through acquisition and new ventures such as the recent Egypt and Novus deals. Further portfolio rationalization has also occurred with the divestment of onshore Otway interests and the farm down of interests to ConocoPhillips in an offshore Darwin block.

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