SANTOS surprised the market with its first billion-dollar revenue quarter for the three months ended September 2013.
Santos delivered a record quarterly revenue of A$1.027 billion (K2.35 billion), up from A$797 million (K1.8 billion) the previous quarter.
This was achieved despite marginally lower production for the period.
The top line was boosted by an improvement in crude production and the receipt of higher crude prices.
Production on a barrel of oil equivalent (boe) fell by less than 1% on the corresponding 2012 quarter, to 13.4 million boe.
Santos attributed the marginally weaker performance to lower gas and condensate production. This was, however, offset by crude production, which increased 11% on the corresponding 2012 quarter, to 2.8 million barrels, driven by the recently developed Fletcher-Finucane field coming on stream.
Importantly, development projects in Papua New Guinea, and Gladstone (Queensland) liquid natural gas (LNG) projects advanced closer to start-up.
Santos reiterated its production guidance at 52 to 55 million boe for this year, although likely to be towards the lower end of the range.
However, management reiterated its other guidance numbers for this year, with costs expected to be in the range A$670 to A$690 million (K1.5 billion-K1.58 billion) and capital expenditure at A$4 billion(K9.1 billion).
Santos said: “Crude prices have remained resilient throughout 2013, while natural gas prices have modestly rallied from very low levels. We do not expect any major downside risk in either the crude or natural gas prices in 2014. – SMH
“Expectations are for modest growth in crude demand for 2014 and high growth for natural gas.
Santos as moving into a two-year period that should deliver significant production, revenue and free cash flow growth, as key projects reach completion.
Despite signs of strain over the development period for its two LNG projects, the balance sheet remains sound.
“We view Santos as a play on the upside potential in crude and natural gas demand, over the medium to long term.
“Consequently, we believe the stock is worth buying at around the current level,” the company said. - SMH