Santos hits fresh 10-month high as it tightens output and sales targets
Santos shares have tapped a fresh 10-month high, after it unveiled a strong third-quarter production report.
Santos is powering ahead on a strong operational performance and the dodging of LNG export restrictions, with shares hitting a fresh 10-month high today after the release a strong third-quarter production report.
The Adelaide oil and gas company (STO) beat expectations on production, sales, revenue and costs after a strong September quarter from its Gladstone LNG operations that saw it raise the lower end of its production guidance.
As a result, shares finished up 5 cents, or 1.2 per cent at $4.28, their highest close since December.
September quarter revenue rose 3 per cent from the previous quarter to $US793m, sales were flat at 21.5 million barrels of oil equivalent and production rose 2 per cent to 15 million barrels, Santos said today.
UBS had been forecasting revenue of $US742m, sales of 20.2 million barrels and production of 14.8 million barrels.
“The company’s third-quarter results continue to highlight the value of our disciplined operating model in delivering a low-cost, reliable and high performance business that can generate significant free cash flow in the current oil price environment,” managing director Kevin Gallagher said.
“Compared to the end of 2016, our net debt position is $US700m lower at $US2.8bn and our forecast free cash flow break-even for 2017 sits at $US33 per barrel, well below the $US47 per barrel at the beginning of 2016.”
Santos said it now expected to produce 58 to 60 million barrels of oil equivalent in 2017, narrowed from previous forecasts of 57 to 60 million.
Sales volumes, including LNG produced at Gladstone using third-party gas, are expected to be 79 to 82 million barrels, up from 77 to 82 million previously.
RBC analyst Ben Wilson said the results had been stronger than expectations because of a good performance at GLNG, where there was a September maintenance shutdown.
Revenue was also helped by stronger realised LNG prices of $US7.50 per million British thermal units.
The stock is up 48 per cent since mid-July, when it hit its lowest point for the year as the Federal Government threatened to implement domestic gas restrictions just on GLNG.
This was because GLNG is the only one of the three Queensland LNG plants built on a business model of exporting third-party gas.
But this month, the three projects pledged to Malcolm Turnbull that they would fill any domestic gas shortfall with gas from their projects, meaning the Santos-led GLNG will not be shouldering the impact itself.
GLNG, in which Santos has a 30 per cent stake, produced 1.23 million tonnes of LNG in the quarter, up from 1.07 million the June quarter.
It did this from 74 petajoules of gas sent to the plant, 54 per cent of which was supplied by third parties (including Santos) rather than GLNG’s coal seam gas fields.
Santos said that during the quarter it had announced it had played a role in the supply of more than 125 petajoules of gas into in the southeast domestic market over the coming years.
“As an Australian company, we understand the importance of reliable and affordable energy for Australian businesses and households, and are committed to playing our role in supplying the domestic market,” Mr Gallagher said.
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