Oil and gas producer Santos has maintained its annual production guidance after delivering a big lift in profit, with four recently commissioned projects poised to drive output growth.
Santos on Friday booked a net profit for the 12 months to December 31, 2011, of $753 million, up 51 per cent from $500 million in 2010.
The result was driven by higher commodity prices and asset sales, offsetting marginally lower production volumes, and was broadly in line with analyst expectations, although IG Markets was anticipating $880 million.
Chief executive David Knox said Santos had achieved a good set of numbers, financially and operationally, and its balance sheet was robust enough to support the company’s many development projects.
Underlying net profit of $453 million was up 20 per cent on the prior corresponding period, but fell short of analysts’ forecasts because the tax rate paid by the company was higher than expected.
“It really relates to undeductible expenses in offshore jurisdictions,” chief financial officer Andrew Seaton told a teleconference on Friday.
“It means that we’ve spent more exploration dollars in places like Bangladesh and Vietnam, which has not been deductible for tax back here in Australia.”
Santos produced 47.2 million barrels of oil equivalent (mmboe) last year, down five per cent from 2010, but in line with the company’s guidance range.
It maintained its production guidance for the current calendar year of between 51 and 55 mmboe.
Output growth will be driven by four newly-commissioned projects, including the Reindeer/Devil Creek domestic gas project near Dampier in Western Australia.
The development, which is 45 per cent held by Santos, began production in December, nearly two years later than operator Apache Energy had originally planned, and will boost WA’s gas supply by up to 20 per cent.
Beyond the provision of domestic gas, Santos is increasingly focused on liquefied natural gas (LNG) for export.
Mr Knox said he was confident the LNG market would be extremely strong in the long term as Asia sought secure, lower carbon energy supply.
He shrugged off talk that North American LNG supply would flood the market in coming years, saying volumes would probably not be as large as envisaged in the long term.
More significant was how Qatar, the world’s dominant LNG supplier, would deal with surplus volumes.
While LNG from its Darwin, Papua New Guinea and Gladstone, Queensland projects had been fully sold into 20-year contracts, marketing had not yet commenced for Santos’ Bonaparte joint venture with France’s GDF Suez in waters straddling WA and Northern Territory, Mr Knox said.
It was hoped the joint venture would enter the front end engineering design phase next year, followed by a final decision to proceed in 2014 and first production in 2018.
Santos declared a fully franked final dividend of 15 cents per share, bringing the full year dividend to 30 cents.
Santos shares closed one cent or 0.07 per cent higher at $13.56.
