Santos posts A$2.7bn loss on impairments, low oil price

JOHANNESBURG (miningweekly.com) – Asset writedowns of A$2.8-billion after tax have plunged Australian oil and gas producer Santos into a full-year loss of A$2.7-billion.

The impairment charges were primarily a reflection of the current oil price environment and related predominately to the company’s Cooper basin, Gladstone Liquefied Natural Gas (GLNG) and the Gunnedah basin assets, the ASX-listed company reported on Friday.

The net loss for 2015 compared with a net loss of A$935-million in 2014.

Underlying net profit decreased to A$50-million in the 12 months ended December 31, from A$533-million the previous year.

Sales revenue decreased by 20% on the previous year to A$3.2-billion, mainly owing to a 48% drop in the average realised dollar price in 2015.

CEO Kevin Gallagher, who started on February 1, said his priority was to assess Santos’s operations and put in place a strategy to ensure the company remained viable in a low price environment.

Chairperson Peter Coates said Santos’s 2015 financial performance reflected the impact of lower global oil prices that had been experienced across the oil and gas industry.

“Despite the continued pressure on the oil price, operationally the business performed well in 2015 with Santos delivering its highest production in seven years, best safety performance on record and the successful start-up of the GLNG project, which has shipped 16 cargoes to date.”

The group’s 2015 production increased by 7% year-on-year to 57.7-million barrels of oil equivalent.

Coates also reflected on the actions that Santos took in 2015 to strengthen its balance sheet and lower its cost base.

“The company raised A$3.5-billion, reduced capital expenditure (capex) by 54% below 2014 levels and lowered production costs per barrel by 10%.  With A$4.8-billion in cash and committed undrawn debt facilities and no material drawn debt maturities until 2019, Santos is well placed to deal with the short term challenges,” he reported.

The producer maintained its 2016 production guidance at 57-million barrels to 63-million barrels oil equivalent. Its capex guidance was cut to A$1.1-billion.