Santos 1st-Half Profit Falls 0.7% as Rising Costs Offset Increase in Sales
By Stephen Wisenthal
Santos 1st-Half Profit Little Changed as Costs Rise (Update2)
(Adds analyst comment from 5th paragraph; updates shares.)
Adelaide, Australia, Sept. 6 (Bloomberg) -- Santos Ltd., the
third-largest Australian-based oil and gas company, said its
first-half profit was little changed, as rising costs and falling
investment income offset increased production and sales.
The Adelaide-based company said its profit fell 0.7 percent
to A$83.6 million (US$54 million), or 13.8 cents per share, for
the six months ended June 30. The result, which was in line with
analysts' expectations, compared with A$84.2 million, or 13.9
cents, in the same period last year.
``The full-year result should at least equal that achieved
last year,' Santos Managing Director Ross Adler said in a
statement.
Santos' profit for the year ended last December was A$176.3
million. The company will produce oil and gas equivalent to
almost 50 million barrels of oil in 1999, compared to 45.6
million barrels last year, he said.
Andrew Williams, oil and gas analyst at Wilson HTM Ltd. in
Brisbane, said the result was about what he had expected, and the
full-year profit should be about A$185 million.
``The big problem I have with this company is that just
doesn't have that growth profile coming through,' he said.
Without a ``major acquisition' it will be years before growth
comes from potential projects such as the Hides gas field in
Papua New Guinea, or the Bayu-Undan gas and condensate, or light
crude, project in the Timor Sea, he said.
Operating Costs
Santos said its total operating expenses rose 26 percent to
A$143.9 million in the first half. This included a A$15.8 million
increase in operating costs, mainly from increased production, a
A$4.1 million rise in pipeline tariffs, and A$1.9 million more in
royalty payments. The charges for asset depreciation and the
depletion of its reserves rose 12.6 percent to A$122.9 million,
reflecting higher production.
The company's first-half sales rose 21.2 percent to A$412.8
million. The amount of oil, natural gas and other hydrocarbons
produced in the six months rose 14.8 percent to the equivalent of
24.1 million barrels of crude oil.
Asian benchmark Tapis crude oil averaged US$14.56 per barrel
in the June half, 1 U.S. cent higher than the same period a year
earlier. During the half-year, Tapis crude recovered from a low
of US$10.90 per barrel, to a high of US$17.90, on June 30.
Still, Santos' average realized U.S. dollar oil price fell
5.1 percent in the half-year, compared with a year ago, said
Adler.
Investment income fell to A$500,000, from A$21.5 million a
year ago. This time, Santos didn't have the benefit of a A$7.4
million gain on the sale of its European unit, or a A$6.1 million
special dividend from Oil Company of Australia Ltd., in which
Santos has a 12.4 percent stake.
Santos' share of the profit of QCT Resources Ltd., fell
A$7.5 million from last year, as the Australian coal producer's
June half earnings fell 75 percent on lower coal prices. Santos
owns 36 percent of QCT's ordinary shares.
Decline Expected
The A$21 million decline in investment income, which was
``generally as expected', offset a A$20.4 million rise in
operating profit, Adler said.
The same factors will affect the full-year profit, he said.
Santos, which has a dominant share of gas reserves in the
Cooper-Eromanga Basin of South Australia and Queensland states,
last year saw production from new oil fields -- Gobe in Papua New
Guinea, Stag in the Carnarvon Basin off Western Australia state
and Elang-Kakatua in the Timor Sea.
Stag and Elang Kakatua have performed below expectations,
though, and the company and its partners in the fields are
debating whether, and how, to invest to improve production from
the fields.
Santos earlier this year bought a 25 percent stake in the
Hides natural gas field in Papua New Guinea from Oil Search Ltd.
for as much as US$90 million, putting it in a position to benefit
from a proposed US$3.5 billion natural gas pipeline from Papua
New Guinea to Queensland state in Australia.
Dividend
Santos was expected to earn about A$85.5 million in the
first half, based on a Bloomberg survey of six analysts.
Forecasts ranged from A$80 million to A$94 million.
Santos declared an interim dividend of 12 Australian cents
per share, the same as a year ago. The total dividend payment of
A$72.7 million was 87 percent of Santos' first-half profit.
Still, this isn't a major concern, as Santos' operating cash
flow, or earnings before interest, tax, depreciation and
amortization, rose 26.2 percent to A$245.1 million -- more than
three times the dividend, said Williams.
Santos' shares rose as much as 6 cents, or 1.3 percent, to
A$4.60, after opening 2.6 percent higher at A$4.66.
The shares have gained 4.6 percent so far this year,
compared with a 26 percent rise in the Australian Stock
Exchange's energy index. |
