Santos has posted an 18 per cent jump in quarterly sales revenue, giving it a financial boost as it develops its costly giant LNG projects.
The market and analysts were impressed with the better than expected second-quarter revenue of $739 million, compared to $625 million for the prior corresponding period.
Santos shares shot up 59 cents, or 5.8 per cent, to $10.69, helped along by rival Woodside Petroleum’s outstanding production numbers also released on Thursday.
However Woodside is ahead of Santos – now that its Pluto LNG project is online – and Santos’ capital expenditure costs leapt up 32 per cent to $859 million for the quarter ($790 million in development).
That will keep the pressure on to continue to generate sales and make coal seam gas discoveries in Queensland, with development costs to continue for several years yet.
The ExxonMobil-led LNG project in Papua New Guinea, which is 13.5 per cent held by Santos, is due to deliver LNG from 2014 while the Santos-operated LNG project at Gladstone, Queensland (GLNG) is due to begin production in 2015.
Fat Prophets resources analyst David Lennox said he thought the company was doing a good job reversing what had been a poor growth profile into a good one in the last two years.
“The two LNG projects they’re in – although they only have minority positions in them – will go some way to rectifying that,” he told AAP.
“Those projects will continue to be a drain on cash for a while until they get to the same position as Woodside Pluto LNG, which has no more capital costs and revenue rolling in the door.
The average gas price of $4.83/gigajoule was up five per cent from the corresponding period in 2011, primarily reflecting higher Indonesian gas prices, although it was down from $5.21 the previous quarter.
Santos is bullish on gas prices, forecasting rises to $6-$9/gigajoule which prompted it to ramp up drilling and development of GLNG, amid supply worries, leading to a $2.5 billion cost blow-out to $18.5 billion during the quarter.
The market appears to have forgiven it, with customers largely sewn up for the GLNG and PNG projects.
A quarterly production lift of nine per cent and the sales revenue rise in both oil and gas were driven by new domestic gas projects in Western Australia and Indonesia, along with the higher prices.
Production rose to 13 million barrels of oil equivalent (mmboe) for the quarter compared to 11.9 mmboe in the prior corresponding period.
Sales volumes only increased one per cent to 14.9mmboe.
Sales revenue of $1.5 billion for the first six months of the year and production of 25.4mmboe were also both higher than in 2011.
Santos chief executive David Knox said the on-time start-up of new projects had contributed to the highest quarterly production result since 2009.
“Higher production, including our best quarterly oil output in four years, combined with strong oil and gas prices, has delivered another solid quarterly result, setting a strong foundation for the second half of 2012,” he said in a statement.
Santos maintained its production guidance for 2012 at 51-55 mmboe.
The average realised oil price for the quarter was $US116.56 ($A112.83) per barrel.
