Santos first-half profit beats estimates, sees output jump in H2

Australian oil and gas producer Santos has reported a smaller-than-expected decline in its first-half underlying profit, while forecasting a significant production increase in the second half as key projects come on stream.

For the six months ended June 30, the company posted an underlying profit of $397 million, surpassing the Visible Alpha consensus estimate of $337.13 million. This compares with $508 million in the same period last year.

Santos declared an interim dividend of 11.6 cents per share.

The company said production in the second half is expected to be 20% to 30% higher than the first half, despite challenges during the final commissioning and ramp-up stages at its Barossa and Pikka projects. It reiterated its full-year production guidance of 99 million to 105 million barrels of oil equivalent (boe).

Santos also noted that stronger Japan Crude Cocktail (JCC) pricing in the second quarter is expected to boost realised LNG prices and cash flow in the latter half of the year. Its LNG contracts are linked to the benchmark with a three-month pricing lag, meaning higher oil prices from the June quarter will feed through to LNG prices later this year.

Oil and LNG prices were elevated during the second quarter due to disruptions linked to the U.S.-Iran conflict. Analysts, according to Visible Alpha, expect a sharp earnings recovery in the second half, projecting 167% growth from last year as higher oil-linked LNG prices take effect.

Shares of Santos were trading 0.5% higher in early trade, while the ASX 200 benchmark index slipped 0.5%.