Santos Energy beats profit expectations, with second-half production up 20-30%

Australian ?oil and gas producer Santos reported a ?smaller-than-expected drop in its first-half profit and forecast higher production ?in the second ?half as its Barossa and ?Pikka ?projects ramp up.

Santos stated that despite the challenges encountered during the final phases of commissioning and ramping up at the Barossa & Pikka Projects, production levels in the second half will still be 20% to 30% higher than the first.

Santos has reiterated that its annual production is expected to range between 99 and 105 million barrels equivalents (boe).

Santos' underlying profit for the six-month period ending June 30 was $397 million. This beat Visible Alpha's consensus estimate, which was $337.13 millions. This compares to $508 million the year before.

The energy producer announced a?interim dividend of 11.6c per share.

Santos expects that higher second-quarter Japan Crude Cocktail prices will boost realized LNG prices and cash flows in the second half. Santos' LNG contracts are tied to the benchmark by a standard industry?three-month price lag. This means that higher oil prices will be reflected in LNG prices for the second half of the year.

Prices of oil and LNG were higher during the second 'quarter, due to disruptions 'linked with the U.S./Iran conflict.

Participants in the market expect earnings to recover sharply in the second half. Visible Alpha's?estimates predict a 167% increase in earnings from last year, as the higher LNG prices linked to oil are reflected with a 3-month delay.

The oil and gas producer's shares were 0.5% higher in early trading, compared to a 0.5% drop in the ASX 200 index.

(source: Reuters)