Santos has lifted its dividend to shareholders, despite a 24 per cent slide in its first half profit as write-downs in Indonesia offset higher production and sales.
The oil and gas producer made a net profit of $206 million for the six months to June 30, down from $271 million a year ago.
But underlying profit, which excludes the impact of one-off write-downs to the company’s coal seam gas assets in Indonesia, was up three per cent to $258 million.
Santos chairman Ken Borda said the start-up of PNG LNG and receipt of first cash from the project had enabled the company to substantially increase returns to shareholders through a 33 per cent increase in the interim dividend to 20 cents per share fully franked.
The company said the 2014 first half result reflects record sales revenue driven by higher crude oil and LNG sales volumes, and higher oil and gas prices, offset by the previously announced non-cash impairment of the company’s Indonesian coal-seam gas assets, and higher cost of sales, exploration expense and net finance costs.
Excluding net impairments and other one-off items, underlying net profit was up 3 per cent to $258 million.
Managing director and chief executive officer David Knox said the result is a solid start.
“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 GLNG is more than 85% complete and on track to start-up next year, within budget.
“We remain focussed on growing shareholder returns as the company’s earnings and cash flows increase.”
Shareholders can expect further good news when the company’s Queensland GLNG project is completed
The project is more than 85 per cent complete and remains on track for first LNG in 2015, Santos reported.
GLNG involves the development of CSG resources in the Bowen and Surat Basins in south-east Queensland, construction of a 420-kilometre underground gas transmission pipeline to Gladstone, and two LNG trains with a combined nameplate capacity of 7.8 million tonnes per annum on Curtis Island.
The project has an estimated gross capital cost of US$18.5 billion from final investment decision to the end of 2015 when the second train is expected to be ready for start-up, based on foreign exchange rates consistent with the assumptions used at FID (A$/US$ 0.87 average over 2011-15).
Santos is a 30 per cent partner in the project.
Santos said it intends to “maintain or increase each dividend as earnings and cash flow increase. It is expected that the level of dividend will next be reviewed around the time of GLNG start-up”.
