Santos revises production guidance
Santos shares recovered 0.77 per cent yesterday after a two-month slump after the oil and gas producer confirmed it expects to miss this year’s production guidance and produce less oil and gas than it did last year.
Shares closed at $14.41 up from its Tuesday close of $14.30 and Monday’s $13.97.
The turnaround ends Santos’s slump from an end of September high of $15.50.
With less than four weeks of 2013 remaining, Australia’s second-largest pure play petroleum producer said at an investor seminar on Wednesday it now expected to produce 51 million barrels of oil equivalent (mmboe), compared to 52.1 (mmboe) last year.
Santos in October warned that production would be at the lower end of guidance of 52-55 mmboe, which was a downgrade of guidance of 53-57 mmboe at the start of the year.
Despite fears about rising domestic gas prices and shortages in Australia, the weaker performance was linked to the east coast gas market currently being in transition ahead of the start-up of Queensland’s large liquefied natural gas projects.
Fewer gas spot market opportunities in Western Australia were also cited and its damaged Chim Sao oil and gas pipeline in Vietnam, although that has since been repaired.
Investors reacted, sending the Santos share price down 32 cents, or 2.2 per cent, to $13.98 by 1130 AEDT, before it recovered to $14.41.
Santos has predicted better production next year, of 52-57 mmboe, as new projects come on line including the PNG LNG project it is a joint venture partner in.
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However, even that figure is below some analysts’ expectations, with maintenance issues in its Cooper Basin and Darwin LNG projects to restrict production flows.
Capital expenditure was predicted to fall next year from a peak in 2013 of $4 billion to $3.5 billion.
Chief financial officer Andrew Seaton told investors that Santos expects to be producing 80-90 mmboe by 2020.
The company’s vice president of strategy and corporate development Peter Cleary said Santos would benefit from soaring global LNG demand that would more than double to above 500 million tonnes a year by 2030 and send up prices that already were rising for Australian domestic users.
Santos is involved in six planned or operating LNG projects, including the game changing $US18.5 billion ($A20.30 billion) GLNG project in Queensland.
