Oil miner Santos (ASX:STO) have released their Q4 activities report, showing maintained levels of production, along with noticeably lower revenue figures.
Steady Production Levels
Q42015 production was relatively steady at 14.9MMboe, being 3% higher, when compared to Q32015. However, production was 1% lower to the pcp. Full year production was 57.7MMboe, being 7% higher than 2014.
Executive Chairman Peter Coates attributed the persistent levels in production to the positive performance of several mines: “PNG LNG and Darwin LNG operated at record rates during the fourth quarter, while GLNG has ramped up as expected following first LNG in late-September.”
Crude production was 9% lower than the previous quarter, in response to reduced development activity, along with natural field decline.
Significantly Lower Revenue Figures
On the contrary, Santos’ revenue figures show the company’s vast exposure to the volatility in the oil price.
Q42015 revenue was $828 million, which was 2% higher than Q32015. Although, revenue was 24% lower, when compared to the pcp. 2015 full year revenue was $3.2 billion, being 20% lower than 2014. The average realised price for 2015 was A$71.44 a barrel, 37% lower than 2014.
Executive Chairman Peter Coates addressed the noticeably lower revenue figures: “The Company’s fourth quarter results reflect the company’s response to the challenging oil price environment. Santos will continue to review its operational and development plans with a focus on preserving cash.”
On the 9th of November 2015, Santos announced a $3.5 billion package of capital initiatives, in order to strengthen the balance sheet and reduce debt. Since that announcement, Santos has completed the equity issuances under the placement and entitlement offer, with all proceeds received during Q4.
Cash from the $520 million sale of the Kipper gas asset to Mitsui E&P Australia is expected to be received around Q12016. As at the 31st December 2015, Santos had $4.8 billion in cash, along with committed undrawn debt facilities available.
Over the 2nd half of 2015, Santos managed to pay off approximately $2 billion of debt. This left Santos’ net debt position to be at $6.55 billion. They have no material debt maturities until 2019.
Peter Coates commented positively on their capital management: “Santos is well placed to withstand an extended period of low oil prices, with $4.8 billion in cash and committed undrawn debt facilities, and no material debt until 2019. We are continuing to focus on reducing our capital expenditure and will build upon the significant improvements that we have made to our operating efficiency.”
With regards to the preparation and finalization of full year accounts, Santo is currently considering the oil price assumptions it uses for asset impairment analysis and reserve bookings.
For its 2016 operational, development plans and forecasts, its primary focus is preserving cash and will provide an update at the release of its 2015 financial accounts.
Up Over 8% at Open
Investors have reacted quite positively to the announcement, along with the surge in the oil price overnight. STO is up over 8% (as at 10.20am AEDT), to $2.77. However, STO is down over 24% for the year, due in part to the ongoing slump in the crude oil price.
Author: Imran Valibhoy
Jan 22, 2016
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.