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Santos half-year loss narrows

Business

Adelaide-based oil and gas producer Santos has reduced its half-year loss to $US506 million ($A640 million) even though it had an impairment charge of $US689 million on account of lower oil price forecasts.

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The loss for the first six months of 2017 was better than the $US1.1 billion loss a year earlier, helped by an improvement in gas prices and cost reductions in its operations.

Underlying profit, which strips out the significant items, rose to $US156 million compared to a $US5 million loss a year ago.

Chief executive Kevin Gallagher said the results showed strong progress on the company’s turnaround strategy.

“We have removed substantial costs, generated significant free cash flow and reduced net debt,” Gallagher said.

Santos’ production and sales volumes for the half-year were slightly lower due to the sale of some non-core assets, but revenue jumped 24 per cent to $US1.5 billion.

This was primarily driven by a 28 per cent improvement in average realised oil prices to $US54.80 a barrel as well as a ramp-up at its Gladstone LNG project in Queensland.

However, the company expects future oil price growth to be capped, and earlier in August lowered its oil price forecasts, resulting in a net $US689 million impairment charge.

This included a $US867 million writedown against the GLNG project, a further impairment of $US149 million against non-core assets in Indonesia and a positive write-back of $US330 million against its Cooper Basin assets.

Santos on Thursday also slightly raised its sales volume guidance for the full year.

It now expects to sell between 77 and 82 million barrels of oil equivalent in 2017, up from 75 to 80 million that it outlined in July.

Material reductions in drilling costs in the Cooper Basin and GLNG are unlocking more gas supply, Gallagher said.

“In the coming months, Santos expects to announce further domestic supply contracts to support the federal government’s efforts to deliver affordable and reliable energy to households and industry,” he said.

The company said its board had decided not to pay an interim dividend, given its focus on debt reduction.

– AAP

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