Santos Reports 1H07 Results

Santos today reported underlying net profit after tax of $305 million for the first 6 months of 2007. This compares with the record result of $407 million for the first half of 2006.

The decline in underlying profit was recorded notwithstanding record production during the half, which was up by 5% to 30.1 million barrels of oil equivalent (mmboe).

Sales revenue was down by 7% to $1,215 million, reflecting lower Australian dollar liquids prices caused by the appreciation of the A$: US$ exchange rate.

The realized oil price in Australian dollars was down by 9.7% to A $83.27 per barrel, although the price in US dollars was down by only 0.4% to US$68.19 for the period.

The average realized gas price of $3.84 per gigajoule (GJ) was 2.2% higher than 2006. Realized Australian domestic gas prices increased by 7%, although this was offset by lower realized international gas sales revenue in Australian dollars.

Earnings before interest, tax, depreciation, amortization and exploration (EBITDAX) decreased by 4% to $964 million.

Production costs per barrel increased by 8% to $7.01 per boe, reflecting an ongoing focus on cost control offset by higher unit costs due mainly to production constraints at the Maleo gas field in Indonesia and the deferral of some Cooper Basin oil production.

Operating cashflow decreased by 16% to $538 million reflecting an insurance receivable of $95 million relating to the Moomba incident in 2006, higher tax payments in 2007 of $91 million, offset by favorable working capital movements of $107 million.

Commenting on the 2007 first half result, Santos’ Managing Director, Mr John Ellice-Flint, said "Santos’ solid operational performance continued in 2007 as we delivered record production and managed to control production costs, although the appreciating Australian dollar and higher depreciation and depletion charges impacted negatively on profits."

"Looking forward, our focus is on transitioning our business towards higher margin products and monetising our large contingent resource base."

"LNG will play an increasingly important role as a higher value market for our gas, as evidenced by our proposal to develop an LNG export facility in Gladstone - a transformational project for Santos."

"Not only does this project give us the ability to commercialize large quantities of contingent coal seam gas resources, it also targets these resources towards a rapidly growing, high value and deep international market."

"Significant progress has been made on the ExxonMobil operated PNG LNG project since we kicked off the pre-FEED studies in April this year. The joint venture is aligned behind ExxonMobil and we are on track to move to a formal FEED process by the end of this year."

"Santos’ guidance for 2007 and 2008 unchanged, that is, production of between 59 and 61 mmboe, underpinned by the exploitation of Cooper Basin oil and coal seam gas in eastern Queensland."

"Beyond that, we see moderate organic growth into the next decade, followed by a step change as projects such as Dua and Blackbird (Vietnam), Reindeer (Western Australia), Henry and Kipper (Victoria) and Gladstone LNG , PNG LNG and Darwin LNG 2 come on line."


Santos’ interim dividend has been maintained at 20 cents per share, fully franked.

The interim dividend will be paid on 2 October 2007 to registered shareholders as at 4 September 2007, with an ex-dividend date of 29 August 2007.


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