By Peter Milne
Santos’ half-year profit slid 17 per cent to $US659 million ($977 million) after its revenue from selling oil and gas fell, but a record interim dividend did not prevent its share price from slumping by more than five per cent.
Production in the first six months of 2024 was the equivalent of 44 million barrels of oil, down two per cent, while sales revenue of $US2.7 billion slid further, dropping nine per cent.
Santos chief executive Kevin Gallagher said Moomba would reach full capacity this year.Credit: Ben Searcy
Jardin analyst Nik Burns said the earnings and profit results were slightly below the consensus, driven by higher costs, but it was positive that all projects were predicted to be delivered on time and within budget and that Santos had not changed its 2024 guidance.
MST Marquee energy analyst Saul Kavonic has longer-term concerns, telling clients the material presented by Santos to investors on Wednesday indicated free cash flow would decline from 2030 as production of liquefied natural gas from Papua New Guinea fell.
Santos is powered by its PNG business, which accounted for 47 per cent of revenue and 55 per cent of its total earnings before interest, tax, and depreciation for the half-year of $US1.85 billion.
Its PNG gas production is processed for export at ExxonMobil’s PNG LNG facility.
Santos has a 23 per cent stake in a proposed new gas project – Papua LNG – operated by France’s TotalEnergies. In April, a final investment decision was pushed back to 2025 after bids received to construct the notionally $15 billion project were too high.
Chief executive Kevin Gallagher said any further delay to Papua LNG “could potentially create a hole in the production” but Santos had a “plan B” to increase gas flow from its oil fields to the existing PNG LNG facility.
The Adelaide-based company reported that its flagship Barossa gas export project north of Darwin was 80 per cent complete, with the first gas expected to flow in the third quarter of 2025.
The Pika project in Alaska is nearly 60 per cent complete, with oil production due to start in the first half of 2026, while in South Australia, Santos is commissioning its Moomba carbon capture and storage project.
Santos chief Kevin Gallagher said Moomba would reach full capacity this year.
“Phase one of Moomba CCS will be one of the lowest-cost CCS projects in the world and have capacity to permanently store up to 1.7 million tonnes of carbon dioxide annually,” he said.
In Western Australia, Santos faces substantial costs to ensure old offshore wells do not leak and to remove pipelines and platforms from the ocean. Santos chief financial officer Anthea McKinnell said the company was working with regulators to spread the cost over time to ensure the WA operation did not drain cash from the rest of Santos.
The Santos share price had fallen 5.3 per cent to $7.40 by mid-afternoon on Tuesday.
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