SANTOS has joined the growing list of oil and gas players flagging major asset impairments as the oil price recently took another tumble.
Santos executive chairman Peter Coates said the fourth quarter results reflect the company’s response to the challenging oil price environment.
Fourth quarter sales revenue was $828 million, 24 per cent below the previous corresponding quarter, with the average realised oil price down 33% to $61 per barrel.
Production of 14.9 million barrels of oil equivalent (mmboe) was in line with the corresponding quarter and brought full year production to 57.7 mmboe, Santos said.
In preparation for its full year financial accounts, Santos said it is currently considering the oil price assumptions it uses for asset impairment analysis and reserve bookings.
Santos expects to book reductions to both asset carrying values and reserves which will be announced with its full year report on 19 February.
In addition, the company said it is considering its 2016 operational and development plans and forecasts, with a focus on preserving cash.
Santos’ net debt position as at 31 December 2015 was $6.55 billion.
Mr Coates added that the company is focused on reducing capital expenditure and building on improvements to operational efficiency.
“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 maturities until 2019,” he said.
On a positive note, Mr Coates said PNG LNG and Darwin LNG operated at record rates during the fourth quarter, while GLNG has ramped up as expected.
During the quarter, PNG LNG operated at an annualised rate of about 7.6 million tonnes per annum (mtpa), 10% above nameplate capacity.
A total of 26 LNG cargoes were shipped from PNG LNG during the fourth quarter, which took the full year total to 101 LNG cargoes shipped.
At GLNG, train 1 produced 544,000 tonnes of LNG during the quarter and commissioning work on the second train is underway with first LNG expected in the second quarter of 2016.
Santos reported Darwin LNG achieved a record annual LNG production of 3.8 million tonnes, with 15 LNG cargoes shipped during the quarter.
Production in the Cooper basin for the quarter was 16.0 petajoules, 9% lower than the corresponding quarter, which Santos said reflected reduced development activity and natural field decline.
Full year production of 57.7 mmboe was reported and within the company’s guidance range of 57 to 59 mmboe, Santos said.
Capital expenditure, excluding capitalised interest, was 8% below 2015 guidance and 54% below the prior year, according to the company’s fourth quarter report.
In November last year, Santos announced the appointment of Kevin Gallagher as managing director and chief executive, with Mr Gallagher taking on the role as of 1 February 2016.
Peter Coates will resume his non-executive chairman role on the same date.