Australia's Santos Posts 82% Fall in 1H 2015 Net Profit to $27M

Australia's Santos Ltd. recorded a net profit after tax of $27 million (AUD 37 million) for first half 2015 (1H 2015) , down 82 percent from last year's $150.46 million (AUD 206 million) as significantly lower oil prices and higher exploration expense contributed to the sharp decline, the company said in its release of financial results Friday.

There was an increase in production during this period, with the volume rising 13 percent to 28.3 million barrels of oil equivalent (MMboe), compared to 25.0 MMboe in 2014 due to higher-than-expected output from the Papua New Guinea (PNG) liquefied natural gas (LNG) and Darwin LNG projects.

"However, the lower realized oil prices resulted in sales revenue declining by 15 percent. The average realized oil price was $60 per barrel for the period, compared to $115 in the previous first half – a 47 percent reduction," Santos said in the press release.

Meanwhile the firm's exploration costs increased to $141.60 million (AUD 194 million) in 1H 2015, 90 percent above $74.45 million (AUD 102 million) a year earlier, with the drilling campaign in PNG and Malaysia yielding the successful Bestari-1 oil discovery offshore Malaysia but did not result in other commercial finds.

“Capital expenditure for the first half was 55 percent below 2014 levels and we cut the production costs per barrel by 11 percent to $10.01 (AUD 13.70) per barrel of oil equivalent,” Santos Managing Director and CEO David Knox said.

“We have been and continue to take appropriate steps to reduce costs further. We are also working closely with our suppliers and contractors towards that end. I am pleased to say we are on track to deliver our 2015 target of $131.27 million (AUD 180 million) in gross supply chain savings ... Tightly managing costs will continue to be a key focus as we work through the current oil price environment,” he added.

On development projects, Santos has brought gas into the LNG Train 1 at GLNG. Other GLNG project milestones include the commencement of all major upstream processing facilities, completion of the commissioning of all LNG facility power generation and other utilities, unloading of the propane and ethylene refrigerant into storage and commissioning for all six LNG Train 1 refrigeration compressors. The company added that the GLNG team will start up Train 1’s “front end” pre-treatment units before chilling down the “cold end” refrigeration units to make LNG, with the project still on track to deliver first LNG around the end of the third quarter.


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