Takeover Target Santos Pares Capital Spending, Trims Output Forecast
MELBOURNE, Oct 22 (Reuters) - Australian oil and gas producer Santos Ltd, looking to beef up its balance sheet after knocking back a $5 billion takeover offer this week, flagged on Friday it would cut capital spending by a further 10 percent this year.
Santos also lowered the top end of its 2015 oil and gas production forecast by 5 million barrels to 57 million to 59 million barrels of oil equivalent (mmboe), blaming the change on unscheduled outages and lower than expected demand for its gas in Queensland.
It said capital spending would drop to A$1.8 billion ($1.3 billion), as it deferred some development activity amid a wider strategic review and auction of assets as it races to cut its A$8.8 billion net debt pile.
Santos on Thursday rejected a A$7.1 billion bid from Scepter, a firm backed by the royal families of Brunei and the United Arab Emirates, calling the offer opportunistic and saying the conditions would have hurt consideration of other alternatives.
Its third-quarter sales revenue fell 24 percent to A$808 million, hit by weaker oil prices. This was partly offset by a 4 percent rise in gas production to 14.5 mmboe, due mostly to its prized stake in the Papua New Guinea liquefied natural gas (LNG) project.
"We said that we would produce more for less and this quarter's figures are a strong reflection of that. Year to date production is up 10 percent while capex is down 55 percent and unit production costs are down 15 percent," Santos CEO David Knox said in a statement.
Santos has just started exporting from its $18.5 billion Gladstone LNG project, the biggest project it has ever built and operated, boosting its credentials as a gas supplier to Asia.
($1 = 1.3864 Australian dollars)
(Reporting by Sonali Paul; Editing by Richard Pullin)
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