Santos Sees over $50M of Production Cost Blowout for 2012

Santos disclosed Thursday that it is looking at a production cost blowout for the full-year 2012, after being hit by up to $53 million (AUD 50 million) of extra costs at non-operated assets.

The company said that production costs for last year is likely 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).

A portion of Santos' production costs will be offset by its revenue. The company noted that its 2012 full-year revenue is at $3.39 billion (AUD 3.22 billion), up 18 percent from 2011.

Meanwhile, Santos' updated production guidance states that the company is expecting clock in a full-year production output of 52.1 million barrels of oil equivalent (MMboe), in line with its earlier issued guidance of 51 MMboe to 55 MMboe.

Commenting on the company's production output, Santos' CEO David Knox said: "New producing assets such as Reindeer and Chim Sao, combined with strong Cooper oil production, drove a 10 percent lift in Santos' output in 2012."

Santos' flagship Gladstone LNG (GLNG) project remains on track for first LNG in 2015. The company has received its last shipment of pipe in Queensland and started pipeline burial. The GLNG project – designed to take in piped coal seam gas from the Surat and Bowen basins, around 249 miles (400 kilometers) away from the coastal city of Gladstone – has seen some 3,200 CSG wells already been drilled.

Developing GLNG has not been a smooth ride for Santos; the company is grappling with strong public outcry against the use of hydraulic stimulation techniques associated with the project. Santos acknowledged in June last year that it is grappling with a shortage of gas, and that it needs to scour for more gas ahead of the project's 2015 start up. The production cost estimate for GLNG was revised upwards 16 percent last year to $18.5 billion.

Santos is also facing cost pressures in bringing on track its PNG LNG project. While the project remains on schedule for first LNG in 2014, its capital cost estimate has also been revised upwards.


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