FRIDAY, AUGUST 26, 2005
SYDNEY Santos, Australia's third-biggest oil and gas producer, said Thursday that first-half profit more than tripled after oil output surged and prices rose.
Net profit rose to 289.5 million Australian dollars, or $219 million, in the six months that ended June 30, from 85.3 million dollars a year earlier. Excluding one-time items, profit rose 48 percent to 242 million dollars, as sales rose 73 percent.
Production rose 24 percent from the year earlier, when output was reduced after a Jan. 1, 2004, fire at the Moomba gas plant in central Australia. The cost of sales jumped 41 percent, partly because of increases in gas purchases from rivals to rebuild storage at Moomba and replace gas lost from the shutdown of a field in Western Australia.
"The 242 million dollars was a little bit below our number, there were a few one-offs in there that the company is stripping out as significant items," said Andrew Blakely, an oil and gas analyst at Macquarie Equities in Melbourne. "There were also slightly more third-party gas purchases than we had anticipated."
Santos shares rose 27 cents, or 2.5 percent, to 11.11 dollars on the Australian Stock Exchange after the company increased its full-year output forecast by 1 million barrels of oil equivalent to 55 million barrels.
The managing director, John Ellice-Flint, is raising spending on exploration in countries like Indonesia and Egypt to take advantage of record oil prices and replace declining reserves in the Cooper Basin. In January, Santos said its Jeruk discovery off East Java was likely to be its biggest ever oil find.
The average price Santos got for its oil surged 41 percent in the half to 46.76 dollars a barrel, the company said last month, helping to raise sales to a record 1.02 billion dollars. Santos increased its interim dividend by 20 percent.
Santos started output March 29 at its 440 million dollar Mutineer-Exeter oil project off Western Australia, which helped almost double oil output in the second quarter. It owns 10.6 percent of ConocoPhillips's $3.3 billion Bayu-Undan project in the Timor Sea, which started producing gas liquids and condensates in March last year and is due to start liquefied natural gas production early next year.
"The higher profit and interim dividend reflect our growing production profile and the increased proportion of liquids versus gas in our production mix," Ellice-Flint said in the earnings statement.
Santos's revised 2005 output forecast is 17 percent higher than the 47 million barrels it produced last year. Next year, output is expected to rise by at least 10 percent, helped by five new offshore projects scheduled to start production in the next 18 months, Santos said.
The plan to start production at the Darwin LNG plant is on schedule, while the John Brookes gas field off Western Australia is due to start production within a month, Ellice-Flint said in an interview. Santos and ConocoPhillips are currently drilling the Caldita exploration well off northern Australia, to be followed by the Firebird well, with the aim of finding enough gas to feed a possible second LNG production unit at Darwin, he said.
Santos's first two projects in Indonesia, Oyong and Maleo, are set to start up next year. Santos is drilling an appraisal well at Jeruk and plans further seismic work at the field and more appraisal drilling this year, it said. In total, 90 wells are planned in the second half.
"For Santos, it's all about replacing the old assets which are in decline with new assets and exploration," said Stuart Baker, an oil and gas analyst at Morgan Stanley in Melbourne. "It's a question of how quickly they can bring those new things through and how quickly they can make discoveries to replace those mature assets. They need projects to come into the mix beyond 2007 and Jeruk is important in that regard."
Santos last month said it agreed to buy the Denver-based coal-seam gas producer, Tipperary, for about $306 million in cash, and this year it bought all the stakes that OMV had in gas production and exploration ventures in Australia. The company will not seek more acquisitions this year, Ellice-Flint said.
Santos declared an interim dividend of 18 cents a share, up from 15 cents the year earlier.
Net rises at Australian Gas
Australian Gas Light, the country's biggest energy retailer, said full-year net income more than doubled to 848.3 million Australian dollars, from 349.5 million dollars a year earlier, because of a first-half gain on the sale of its stake in NGC Holdings of New Zealand.
Full-year underlying profit, which excludes one-time items and outside equity interests, rose to 386.8 million dollars.
"The underlying profit result was achieved in a period of intense competition and milder weather conditions, which affected the retail business in particular," said the managing director, Greg Martin. The profit increase was in line with Australian Gas's forecast in February of 5 percent to 7 percent.