Santos revenue lifts as gas price recovers
Santos saw its first-quarter revenue rise, despite a dip in output, as the South Australian producer cashed in on higher Asian LNG prices.
Santos saw its first-quarter revenue rise, despite a dip in output, as the South Australian producer cashed in on higher Asian LNG prices over the three-month period.
First-quarter revenue of $US964m ($1.24bn) was 5 per cent higher than the prior period, despite the contractual three-month lag in oil-linked prices of LNG and lower overall sales volumes, the Adelaide-based company said.
Chief executive Kevin Gallagher said the rally by LNG prices earlier this year should lead to stronger prices in the second quarter as the lag effect fades.
“First quarter oil-inked contractual LNG pricing increased from 2020 4Q due to an average three-month lag on JCC oil pricing of $US44 a barrel,” RBC analysts said.
“Revenue also benefited from the recent exceptionally high North-east Asian spot LNG pricing with NE Asian spot LNG price averaging $US9.75 per million British thermal units over the March 2021 quarter, or a 75 per cent increase over the last quarter.”
The company’s first-quarter oil and gas output fell by 2 per cent compared to the prior quarter on lower gas demand in Western Australia and unplanned maintenance in Papua New Guinea where it holds a stake in the PNG LNG project.
“We are currently forecasting more than US$1bn in free cash flow for the year at current oil prices,” Mr Gallagher said.
The Santos chief will receive a $6m “once-off growth projects incentive” to deliver the oil and gas giant’s major projects to 2025, in a move designed to keep him out of the race for Woodside’s top job.
The Santos board has agreed to pay Mr Gallagher the incentive to see through its major projects, including the recently-approved $4.7bn Barossa gas project in the Northern Territory, Dorado and Moomba carbon capture and storage project developments.
He will also continue to lead the energy strategy to 2025, aimed at transitioning the ASX-listed, $15bn group to cleaner fuels and its target of net-zero emissions by 2040.
Santos plans to cut its Scope 1 and 2 emissions by 26-30 per cent by 2030 on a 2020 baseline. Scope 1 and 2 emissions refer to pollution directly emitted as part of a company’s operations, and those released by core parts of its supply chain such as energy generation.
It will rely on a yet to be sanctioned carbon capture and storage scheme at Moomba which can permanently store 1.7m tonnes of carbon dioxide a year.
Santos fell 0.3 per cent to $6.92.
Additional reporting: Dow Jones newswires
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