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Santos lifts production target to double 2018 output


Adelaide-based oil and gas producer Santos has lifted its 2025 oil production target to more than double its 2018 output.

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The announcement, posted on the Australian Stock Exchange to coincide with the company’s Investor Day in Sydney, lifts the company’s production target from 100 million barrels of oil equivalent (mmboe) by 2025 to 120 mmboe by 2025.

The company’s share price dipped slightly, in line with a broader sell-off across the market this morning, but recovered, up 0.49 per cent by 10:30am today.

The S&P / ASX 200 index was down 1.8 per cent in the first hour of trade today in anticipation of the Reserve Bank of Australia’s meeting this afternoon, with investors expecting no change to interest rates despite sluggish retail sales and consumer confidence leading into the Christmas trading period.

Speaking at the Investor Day, Santos CEO Kevin Gallagher said the company’s strategy had been to establish a low-cost operating model to deliver strong cash flow throughout the oil price cycle.

“We are now positioned for disciplined growth leveraging existing infrastructure in all five of our core assets, which we believe will deliver 120 mmboe by 2025,” he said.

Gallagher added that Santos was investing in lower-emissions projects including carbon sequestration.

“Natural gas is forecast to supply a quarter of the world’s total energy demand by 2040,” he said.

“Through our Energy Solutions business, we are investing in projects to lower emissions and assessing the significant potential for carbon capture and storage in the Cooper Basin.”

The company also expects capital expenditure in 2020 to increase to a total of $1.45 billion, up 45 per cent from 2019, including spending of $500 million for its key growth projects in Australia and Papua New Guinea.

Santos also forecast initial oil production from its Dorado field off Western Australia, one of its key growth projects, would be between 75,000 to 100,000 barrels per day (bpd), up from an earlier estimate of 50,000 bpd.

Santos, which owns an 80 per cent stake in Dorado and is the operator, said it expects the development of the oil field to cost between $1.9 billion and $2.2 billion.

Dorado is considered Australia’s biggest oil find since 1996.

In October, Santos further consolidated its position in the global gas market by acquiring the northern Australian business of ConocoPhillips in a $1.39 billion deal, which is expected to increase Santos’ output by 25 per cent.

Santos expects the development cost for its Barossa project off northwestern Australia to be $4.7 billion, which the company is aiming to develop to keep the Darwin LNG plant open.

The Bayu-Undan gas field that currently feeds the plant is set to run dry in 2022.

The company narrowed its 2019 production guidance range to 74 to 76 mmboe from its previous forecast of 73 to 77 mmboe.

– with AAP

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