Australia’s Santos reports lower sales revenue

Australian LNG player Santos reported a drop in its sales revenue and production in the first quarter of this year.

The independent LNG producer said on Thursday that its January-March sales revenue of $1.63 billion dropped 13 percent when compared to the prior quarter and 13.5 percent when compared to the same quarter last year.

In the fourth quarter, the company’s sales revenue reached almost $1.9 billion, while the firm reported a record sales revenue of $7.8 billion in 2022 on the back of high LNG prices and increased PNG LNG position after the merger with Oil Search.

Santos said its Q1 sales revenue was lower the prior quarter primarily due to lower domestic gas and LNG sales volumes, and lower LNG and oil prices.

Production of 22.2 mmboe was lower than the than 25.6 mmboe in the prior quarter primarily due to reduced domestic gas volumes in Western Australia supported by extended production from the Bayu-Undan field, it said.

56 LNG cargoes

The Australian LNG player said its average realized LNG price of $14.46 per MMBtu in the first quarter dropped when compared to 16.92 per MMBtu in the prior quarter but it rose when compared to 13.77 per MMBtu in the same quarter last year.

According to Santos, the average realized LNG price was lower than the prior quarter, reflecting the link of sales contracts to a lower lagged Japan Customs-cleared Crude (JCC) price and lower average JKM spot prices.

Three-month lagged JCC averaged $100/bbl in the first quarter of 2023 compared to $113/bbl in the fourth quarter of 2022.

Santos’ LNG projects shipped 56 cargoes in the first quarter, of which four were sold on a JKM-linked basis, one from Darwin LNG and three from PNG LNG.

The company said that first quarter east coast domestic gas price is skewed by third-party gas trading activities, which facilitate the supply to customers.

“Santos makes a small margin on traded gas, net of transportation costs. These third-party volumes were contracted in 2022 prior to implementation of the government’s emergency price order,” it said.

Santos managing director and CEO, Kevin Gallagher, said that free cash flow of around $720 million “positions the company well to maintain a strong balance sheet, deliver higher shareholder returns and invest in cash-generative critical fuels projects and decarbonization.”

He said that the company’s Moomba CCS project, which will be one of the biggest in the world, is 60 percent complete and on track for first injection of CO2 next year.

“Despite the uncertain external environment Santos continues to perform strongly against the backdrop of regulatory and economic uncertainty. The disciplined operating model we have in place positions us to deliver on our strategy to backfill and sustain our infrastructure, decarbonize and develop future clean fuels,” Gallagher said.

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