Energy producer, Santos Limited (STO) reported a net profit of US$156 million for the first half of 2017 against a US$5 million loss in 2016. The company has been in a rebuilding phase over the last 18 months and is well on the way to meeting its renewed strategy under new CEO Kevin Gallagher.
Santos updated the market last week on impairments and accounting changes that would impact this result totalling US$689 million. A one off non-cash impairment US$149 million primarily due to lower oil prices from its AAL (Indonesia oil) business and a US$870 million changer on its Gladstone Liquid Natural Gas (GLNG) operation and this was partly offset by a write-back from the Cooper Basin totalling US$330 million.
The average oil price did increase over the first half of the year which has helped lift margins over the term. Production levels fell 5% over the half, as expected, due to the sale of its Victorian Mereenie and Stag assets. The remaining core asset production increased by 2% thanks to higher output from its Gladstone Liquid Natural Gas (GLNG) program
Santos continues to look for efficiencies within its business to help drive higher realised prices for its products, Santos said its earnings (EBITDAX) increased by 46% over the year to US$718 million, up 1.4% over the last half. Santos capital expenditure increased to US$321 million up from US$283 million including the Muruk acquisition and exploration drilling costs.
2017 year end forecast for free cash flow breakeven cost is expected to fall to US$33/bbl down 30% on year end 2015. Santos has reduced its hedging positions to allow it to monitor the impact of commodity price volatility. Net debt was reduced to US$2.9 billion and Santos is targeting a net debt level of US$2 billion by the end of 2019.
Santos expects production of between 57-60 million barrels of oil equivalent (Mmboe) for the FY17 year and expected sales of 7 –82 (Mmboe) Santos will not be paying an interim dividend for 2017.
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