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.

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. “

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.

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.