Santos profits slip

Profit slip: Santos chief executive David Knox

Australian independent Santos posted a fall in profits for the first six months of the year as impairments offset record revenues.

The company posted a profit of A$206 million (US$191.6 million) for the first half of 2014, down from a profit of A$271 million over the same period last year.

The fall in profits came as Santos booked an impairment of A$67 million related to its decision to withdraw from a coalbed methane project in South Sumatra, Indonesia.

Also hitting the bottom line were higher cost of sales, exploration expenses and finance costs during the first half of 2014 compared to a year ago.

Excluding impairments and other one-off items, Santos revealed its underlying net profit was up 3% year-on-year, at A$258 million.

Helping lift underlying profits and ease the company's higher costs was a 25% increase in sales revenue, with the company generating just under A$1.9 billion over the six month period, compared to A$1.5 billion a year ago.

The record rise in revenue came as output increased from 24.5 million barrels of oil equivalent to 25 million boe, while sales volumes rose 5% to 28.9 million boe.

Helping lift output was the Papua New Guinea liquefied natural gas (PNG LNG) project which came online in April.

The project hit full capacity late last month and Santos said it was expected to contribute to a stronger production performance in the second half of the year.

Despite the fall in net profit, Santos chief executive David Knox was upbeat about the company's first half results.

“The first half of 2014 saw Santos achieve its highest oil production in six years, record sales revenue and strong operating cash flow,” he said.

“We have set the foundation for a stronger second half. PNG LNG is producing at full capacity, and Gladstone LNG is more than 85% complete and on track to start-up next year, within budget.”

Santos maintained its full-year production guidance of between 52 million and 57 million boe, with capital expenditure this year tipped to top A$3.5 billion.

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