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Santos Upgrades 2020 Production Guidance

Australian natural gas developer Santos Ltd has lowered its production cost guidance at US$8.00 (K28)-$8.50 (K29.80)/boe (barrels of oil equivalent) and has upgraded its 2020 production guidance to 87 and 89 million barrels.

According to the firm, the upgrade was due to a strong operating performance across its base businesses and represents more than 50 per cent growth since 2015 and 15-18 per cent production growth for the year. Its asset of PNG LNG has produced 30 per cent above nameplate capacity without extra capital.

In spite of the pandemic, the firm is still on track to deliver the cost reductions it has announced in March - which sees 2020 guidance decreased to US$8.00 to US$8.50/boe.

Other developments include capital expenditure expected to be approximately US$900 million (K3.15b), steady with the 38 per cent reduction for the year announced in March; the integration of the ConocoPhillips acquisition finished in May with guidance on acquisition synergies heightened from US$90 million (K315m) to US$105 (K368mil) million per annum.

Managing director and chief executive officer Kevin Gallagher said that with these developments right on track, the firm is positioned for sustainable shareholder returns and disciplined growth.

“Our strategy has been to establish a disciplined low-cost operating model that delivers strong free cash flows through the oil price cycle,” he said. “Our 2020 forecast free cash flow breakeven oil price is less than US$25 (K87.70) per barrel before hedging and around US$20 (K70) per barrel after hedging. Our base business is strong with production levels expected to remain relatively steady for the next decade and providing significant free cash flow.”

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