Santos swings to $US1.1bn half-year loss
Santos has booked its first underlying loss in two decades, as depressed oil prices haunt the energy group.
Santos has booked its first underlying loss in two decades, as depressed oil prices haunted the energy group in the first half.
For the six months to June 30, Santos (STO) swung to a loss of $US1.1 billion as writedowns forced deep red in the ASX-listed group’s books.
The poor headline number was anticipated, after the group on Monday detailed a post-tax impairment of $US1.05bn against the carrying value of its flagship GLNG project.
The group also reported an underlying loss — which strips out the impact of exceptional items — of $US5 million, its first such loss in at least 20 years through either its full year or interim results.
Analysts had largely expected the lacklustre showing, with both Citi and UBS tipping an underlying loss prior to the release.
The energy group added that its revenue dipped 6 per cent to $US1.21bn, broadly in line with market projections, despite a previously announced 10 per cent lift in production to a record 31.1 million barrels of oil equivalent.
The discrepancy between rising production and falling revenue is explained by weaker realised oil prices.
Santos managing director Kevin Gallagher said the group was making progress in its push to become more resilient to the ebbs and flows of the oil market, retaining a stated goal to be cash flow break-even when prices are between $US35 and $US40 a barrel.
The shift to a new operating model has already helped drive its predicted break-even price down for this year from prior expectations.
“We have made good progress in the first half towards this goal and are forecasting a free cash flow break-even oil price of US$43.50 per barrel for 2016, down from US$47 per barrel,” he said.
“Our progress is also evidenced by record production and significant cost reductions achieved in the first half: unit upstream production costs were down by 15 per cent to $US8.80/boe and capital expenditure down by 58 per cent to $US283 million.
“But there is still a lot of work ahead of us.”
The company reiterated its full-year guidance for production of 57-63 million barrels of oil equivalent.
Santos abandoned its dividend, saying market conditions were not appropriate for a payout to its shareholders.
“The company’s dividend framework provides for the setting of dividends as a payout ratio of underlying earnings,” Santos said.
“Consistent with the dividend framework and the company’s focus of applying available cash flow to debt reduction, the board has resolved not to pay a dividend for the first half.”
The group declared an interim dividend of 15c a share in the corresponding period last year.
