Photo: Courtesy of Santos

Santos posts record production volumes, YoY revenue plunges

Australian gas producer and GLNG operator, Santos reported record production in the third quarter of 2020, edging up the sales revenue by 2 per cent.

Santos posts record production volumes, YoY revenue plunges
Courtesy of Santos

Third-quarter production reached 25.1 mmboe, a record for Santos, 22 per cent higher than the prior quarter.

The sales revenue for the third quarter reached $797 million, 2 per cent up on the previous quarter.

However, compared to the corresponding quarter in 2019 when the reported revenue was $1.03 billion, Santos’ sales revenue slipped 22.6 per cent.

The company noted in its report the results demonstrated the strength of Santos’ diversified portfolio of fixed-price domestic gas contracts combined with a higher equity level in Bayu-Undan, which more than offset lower JCC-linked LNG pricing.

Santos managing director and CEO Kevin Gallagher, “the operating model combined with our portfolio of fixed-price domestic gas contracts, enabled us to deliver higher quarterly revenues and consistent free cash flow generation despite the impact of significantly lower oil price-linked contracted LNG prices.”

“We expect the third quarter to represent the trough for LNG prices, with higher prices expected in the fourth quarter based on current JCC oil-linked and JKM spot pricing, with JKM currently above US$6/mmBtu for December delivery. “

LNG sales revenue down on lower realized prices

Santos reported LNG sales revenue dropped from $400 million in the previous quarter to $252 million in the quarter under review.

The average realized LNG price was at $4.27/mmBtu, down from $8,27/mmBtu in the previous quarter and down from $10.04/mmBtu in the corresponding quarter in 2019.

The average realized LNG price was significantly lower than the prior quarter reflecting the linkage of sales contracts to a lagged Japan Customs-cleared Crude (JCC) price.

Three-month lagged JCC averaged $31/bbl in the third quarter compared to $68/bbl in the second quarter. Santos’ LNG projects shipped 61 cargoes in the third quarter, of which 11 were spot cargoes. JKM spot prices have since recovered to above US$6/mmBtu currently for December delivery.

Santos lowers cost guidance

Upstream unit production cost guidance is lowered to $8.25-8.75/boe due to continued focus on operating efficiencies across the base business and despite one-off cost impacts due to managing the impact of COVID-19.

Santos maintained its production guidance for 2020 at 83-88 mmboe with sales volumes guidance remaining at 101-107 mmboe.