Santos has delivered record revenue of more than $4 billion but is setting its sights much higher
Santos has delivered a solid set of numbers, with records tumbling as it aims for strong production growth.
SA Business
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Santos has delivered record annual production and revenue for the full year, as it sets its sights on growing production by another 50 per cent over five years.
The Adelaide-based energy company said it had produced 75.5 million barrels of oil equivalent in 2019, 28 per cent more than in the previous year.
The result was at the upper end of guidance, and managing director Kevin Gallagher reiterated guidance for next year of 79-87mmboe, including the impact of the $US1.39 billion of the ConocoPhillips business in Northern Australia and Timor Leste which is expected to be finalised during this quarter.
Longer term the company is aiming to grow production to 120mmboe by 2025.
On the revenue front, Santos had record annual sales revenue of $4.03 billion, up 10 per cent, and capital expenditure was $1.01 billion, up 34 per cent.
Liquefied natural gas is now the company’s single largest revenue source, delivering $1.51 billion over the year, followed by domestic gas at $1.17 billion and crude oil at $927 million.
Santos shares were down slightly in early trade at $8.85, but have been trading strongly, recently hitting a 12 month high of $9.07 on January 8, compared with the 12-month low of $5.87 in January 2019.
Mr Gallagher said it was a solid result.
“The year was highlighted by highest ever free cash flow of more than $1.1 billion, record onshore drilling performance, lower unit production costs and significant progress on our diversified portfolio of growth projects,’’ he said.
“The acquisition of ConocoPhillips’ natural gas assets in Northern Australia and East Timor announced in October is fully aligned with our growth strategy to build on existing infrastructure positions and delivers operatorship and control of strategic LNG infrastructure at Darwin.
“Also in the Northern Territory, better than expected gas flow rates from the ongoing Tanumbirini-1 vertical well test are very encouraging and an important step in Santos’ appraisal of the significant resource potential of the McArthur Basin. “Natural gas is forecast to supply a quarter of the world’s total energy demand by 2040 and Santos, with its portfolio of long-life natural gas assets, is well positioned to benefit as we seek to deliver 120 mmboe of production by 2025.
“We are also investing in projects to lower emissions and assessing the significant potential for carbon capture and storage in the Cooper Basin.”
RBC Capital Markets analyst Ben Wilson said the broker maintained its “outperform” rating on Santos.
“Santos remains our favourite name on a relative basis among the large caps as mentioned in our Global Energy Research Commodity Price Update, however significant share price outperformance over the past 12 months (+50 per cent) has crystallised significant value in the stock,’’ he said in a note to clients.
“The current dividend yield of about 2 per cent looks conservative given the upward trajectory on the company’s cash flow generation profile. We are retaining our Outperform recommendation.’’
Santos’s financial results will be released on February 20.