Santos profit slumps as production drops

The energy group has endured lower revenues as gas prices also dipped from the record highs in 2022.

Santos will avoid delays to its much-vaunted $US3.6bn ($5.6bn) Barossa gas field if regulators approve its resubmitted environmental plan according to precedent and allow the resumption of drilling before the end of the year, chief executive Kevin Gallagher said.

Santos is pushing hard for new growth drivers as the company revealed annual profits slumped more than 30 per cent, but Mr Gallagher said its target of first gas from the Barossa in 2025 can still be achieved.

“We’ve done an extensive body of work this year, and extensive consultation going with that. We have now resubmitted our environmental plan to the regulator we’re very confident in the quality of that work and the quality of that document,” Mr Gallagher told The Australian.

“Now we’re just waiting to work with the regulator. Hopefully, we get that approved, and hopefully we can get back drilling before the end of this year… as long as we get drilling before the end of this year, we are still expecting to have first gas in the first half of 2025.”

Mr Gallagher said the regulator typically takes a month to review submitted environmental plans and they can then return with questions or seek additional supporting material — hinting there is internal confidence that they can meet the deadline for resuming drilling without project delays.

Santos’ plans for the Barossa project were up-ended in 2022 when the Federal Court barred work on the company’s after deeming that the oil giant had failed to consult local Indigenous people adequately on the development.

The case was initiated by Dennis Tipakalippa, a Munupi elder, who challenged a decision by the regulator to allow Santos to drill wells 265 kilometres northwest of Darwin and about 140KM north of the Tiwi Islands.

Santos had said the Tiwi Islanders did not need to be consulted because they did not have an interest in the area. It had engaged with the Tiwi Land Council and the Northern Land Council before drilling, which was accepted as adequate by NOPSEMA, but not by the court.

Santos can ill-afford delays to the project as it unveiled a 32 per cent fall in first-half profit as the fossil fuel giant reported reduced production and endured lower revenues as gas prices dipped from the record highs in 2022.

Santos said net profits for the six months ended June 30 totalled $US790m ($1.2bn), down from the $US1.17bn that the company reported one year earlier.

Underlying profit totalled $US801m, down 37 per cent from the same period one year earlier.

Mr Gallagher said the results were driven by the declines in gas prices which soared as a result of a global energy crunch and it masks a strong performance for the company.

“How the company is performing is a great vindication for the merger that we did at the end of 2021. I think it shows we’ve got a very strong robust business that is able to deliver strong profits and cash flows even in what has been a very volatile and challenging environment,” Mr Gallagher said.

Mr Gallagher said Santos is also well positioned to profit from global efforts to decarbonise.

The company’s carbon capture and storage project at its Moomba gas site in South Australia’s north is on course to come online next year.

“Our Santos Energy Solutions division is expanding and continues to work on building new revenue sources through decarbonisation projects. The Moomba carbon capture and storage project will be one of the biggest and lowest cost in the world and is on track for first injection of CO2 next year,” Mr Gallagher said.

Moomba will be critical if Santos is to reach its own targets. The oil and gas company in 2022 strengthened its climate targets, targeting emission reductions of 30 per cent by 2030, the top end of its previous target range of 26-30 per cent by the end of the decade.

It will also be lucrative with Santos’ earmarking the CCS operations to earn carbon credits that will also drive growth for the company.

The coffers of Santos could be swelled soon should the PNG government-owned Kumul Petroleum complete a deal to acquire 5 per cent stake in PNG LNG in a deal worth $US1.4bn.

The deal was first struck in September 2022 but has been twice postponed, though Wapu Sonk, managing director of Kumul Petroleum, told The Australian earlier this month that the deal will close by the end of the year.

Santos shares were down 1.1 per cent to $7.72 in afternoon trade.

Originally published as Santos profit slumps as production drops