Oil and gas company Santos doubles interim profit, rewards loyal shareholders

SA oil and gas producer Santos has doubled its half-year underlying profit and reinstated its dividend payout to shareholders - the first since February 2016.

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SA oil and gas producer Santos has doubled its half-year underlying profit and reinstated its dividend payout to shareholders - the first since February 2016.

The reward to loyal shareholders, who have seen the company survive a near-death experience and multiple takeover attempts in that time, comes after the company announced a doubling of half-year underlying profit to US$217 million.

“Our strategy has been to establish a low-cost operating model that delivers strong cash flows through the oil price cycle,” said Santos managing director and CEO Kevin Gallagher.

“Strong free cash flow has enabled the company to reduce net debt to US$2.4 billion and

reinstate dividends to shareholders.”

Santos will pay a fully-franked US3.5 cents per share interim dividend on September 27.

“This is the first dividend payment to shareholders since 2016 and reflects the Board’s confidence in Santos’ future prospects.”

Santos CEO Kevin Gallagher.

Mr Gallagher said the positive results came in despite the loss of production from its PNG operations due to the earthquake and emphasised the value of its core asset diversified portfolio.

The company has already demonstrated the power of its strong balance sheet, with the near $3 billion buyout of WA company Quadrant Energy, announced on Wednesday.

Mr Gallagher said that acquisition delivers increased ownership and operatorship of a high quality portfolio of low cost, long-life conventional WA natural gas assets which are well known to Santos, and importantly significantly strengthens Santos’ offshore operating capability.

“The acquisition is materially value accretive for Santos shareholders and advances Santos’

aim to be Australia’s leading domestic natural gas supplier.”

Earnings before interest, tax, depreciation, depletion, exploration, evaluation and impairment (EBITDAX) rose 23 per cent to US$883 million and free cash flow was up 22 per cent to US$367 million.

“Consistent application of our disciplined operating model continued to deliver cost reductions

and efficiencies in the first half, with underlying production costs down 4 per cent to US$7.79/boe (barrel of oil equivalent) and further efficiency gains in onshore drilling confirming Santos as Australia’s lowest cost onshore operator.”

Continued cost reductions and efficiencies has enabled a reduction in full-year unit production

guidance to US$8.0-8.6/boe.

Mr Gallagher said the company would “shortly achieve” its net debt reduction target, more than a year ahead of schedule, and therefore have a significantly stronger balance sheet to support its growth strategy.

Santos is on track to supply about 70 petajoules of gas into the east coast domestic market in 2018, which is almost 13 per cent of expected demand, Mr Gallagher said.

The first half result included a net impairment of US$76 million (before and after tax) primarily related to the company’s Asian assets which are held for sale, expected to be completed in the second half of this year.