Jan 23, 2010

Santos PNG gas investment to boost earnings

Santos expects to earn more from its PNG gas venture

AUSTRALIA's oil and Gas Company and third major partner in the ExxonMobil led PNG LNG project Santos Ltd said recently its PNG investment in gas commercialization will transform its earnings come 2014.

Despite reporting an increase in production for the fourth quarter of 2009 compared to the previous year, its overall revenue dropped by 21 percent, hurt by lower oil prices.

In its report to the stock markets the chief executive officer Mr Dick Knox said it was pinning its hopes on PNG lift the company's earnings when production starts.

"The approval of PNG LNG in the quarter was a significant step forward in the company's growth strategy. PNG LNG alone will transform Santos' earnings quality when it comes on line in 2014," said Mr Knox

The company's production for the fourth quarter was 13.9 mmboe or million barrels of oil equivalent, up 2 percent from the prior-year period and flat with the preceding third quarter. Revenue for the quarter was A$600 million (K1.6 billion), down 7 percent from the year-ago period and up 8 percent from the previous quarter.

Santos' average realized price during the fourth quarter was A$85.37 (K226.44) per barrel, down 5 percent  from the same period last year. The company noted that gas production from the Oyong Phase 2 project in Indonesia commenced during the fourth quarter.

Total capital expenditure for the quarter was A$413m (K1.09b), down from A$528.6m (K1.4b) a year ago.

The company said that its production for 2009 was flat with the prior year at 54.4 mmobe, and within the company's guidance range of 53 mmboe-56 mmboe. However, revenue of A$2.18 billion (K5.78b) was 21 percent lower than last year, primarily due to lower international oil prices.

Santos said that its production cost guidance for 2009 was reduced due to cost efficiencies realized in the fourth quarter combined with favorable foreign exchange impacts on US$ denominated production costs. Royalty related taxation expense guidance was reduced, primarily due to actual realized oil prices during the fourth quarter being lower than assumed in previous guidance.

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