Santos Australia misses out on profit due to production costs and lower prices
Santos, an Australian oil and natural gas exploration company, posted a larger-than-expected drop in its first-half profits on Wednesday. This was due to lower realized prices and higher production cost amid a weak demand from China, the top consumer. The shares of Santos fell as a result.
Price fluctuations are unpredictable due to supply chain disruptions caused by geopolitical issues and a weakening of demand in China as a result of weakened economic recovery.
Santos, Australia’s second largest independent gas producer, posted a underlying profit for the six-month period ended June 30 of $654 millions, down from $801million last year. Visible Alpha's consensus estimate was $694.5million.
Analysts at Citi stated in a report that the majority of the misses were at the EBITDA level (earnings prior to interest, taxes, depreciation, and amortization) for most cost items. Unit opex also came in above the guidance.
The unit costs of $7.94 for a barrel of oil were higher than 2023's average of $7.61. This was primarily due to the increased maintenance in the Cooper Basin of South Australia, and the higher electricity costs in Queensland.
Santos shares fell 3.7% by 1209 GMT, to A$7.530. This was their lowest level in two weeks. The broader market declined 0.3%.
Santos reported a 9% drop in product sales revenue. Lower sales volumes were due to a reduced output at the Bayu-Undan oil field, and lower LNG prices offset gains in liquid product prices.
The average realized LNG price dropped 9%, to $12.10 per million British Thermal Units (mmBtu), while the average realized oil price rose 4% to $99.32 per barrel.
Santos, operator of the Pikka Unit Joint Venture in Alaska, has said that the first oil is expected to come from the project in the first six months of 2026, as opposed to the earlier expectations of 2026.
The company declared a 13-cent interim dividend per share. This was higher than the Visible Alpha consensus of 10 cents, and also above the 8.7-cents of a year ago.
Santos has maintained its sales and production forecasts for 2024. Reporting by Roushni Nir and Sherin Sun in Bengaluru, and editing by Shash Kuber and Arun Koyyur.
(source: Reuters)
