Santos Quarterly Revenue Hit by Papua New Guinea Quake
April 18 2018 - 8:26PM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia--Santos Ltd.'s (STO.AU) first quarter sales
revenue was squeezed by a drop in production following a severe
earthquake in Papua New Guinea, which offset stronger prices.
Still, the oil-and-gas producer said it continued chipping away
at its debt pile, putting it on track to hit a US$2 billion net
debt target more than a year ahead of plan. The company, a target
of a takeover offer worth about US$10.5 billion, previously raised
the prospect of returning capital to shareholders if it can hit the
target ahead of schedule.
Santos produced 13.8 million barrels of oil equivalent in the
first three months of the year, a drop of 8% on the prior quarter
and down 6.8% from 14.8 million barrels a year earlier.
The February earthquake forced the temporary closure of Exxon
Mobil Corp.'s (XOM) PNG liquefied natural gas operation, in which
Santos has a 13.5% stake. Planned maintenance at operations in
Australia also dented quarterly output, Santos said.
The shutdown in Papua New Guinea is expected to reduce output
and sales volumes by about 2 million barrels for the full year.
Santos said it had trimmed the upper end of its earlier forecast
for a production range of 55 million-58 million barrels.
Last week, Exxon said the PNG LNG plant had restarted and
deliveries would resume soon.
The hit to production weighed on revenue in the first quarter,
which fell 7.8% quarter-over-quarter to US$794 million, though
revenue was still up 16% on a year earlier due to a jump in
realized prices.
Chief Executive Officer Kevin Gallagher said strong cash flows
during the quarter allowed Santos to cut net debt 8% since the
start of the year to US$2.5 billion. If oil prices remain at
current levels, he said the company should achieve its end-2019
debt target sometime in the second half of 2018.
After riding the Australian boom in oil-and-gas investment,
pouring billions of dollars into new projects, Santos was forced to
sell assets to shore up its balance sheet when it was hit by a
slump in oil prices.
Since taking the helm in early 2016, Mr. Gallagher has tied
Santos's future to the GLNG gas-export operation in east Australia
that counts Total SA (TOT) among its partners, the PNG LNG
operation in Papua New Guinea, the Darwin LNG project in northern
Australia and assets including in the Cooper Basin straddling South
Australia and Queensland states.
Early in April, Santos received a fresh takeover proposal from
private-equity-backed Harbour Energy Ltd. Santos agreed to engage
with the suitor and Mr. Gallagher said Harbour had begun
confirmatory due diligence to determine if it would proceed with a
formal bid.
Harbour, which is managed by EIG Global Energy Partners, plans
to use Santos's assets as a platform for growth in Australia and
throughout Asia.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
April 18, 2018 20:11 ET (00:11 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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