MELBOURNE, Australia--Santos Ltd. (STO.AU) raised its output guidance for the year as it steps up drilling and said it had continued to make progress reducing costs and its debt burden.
The Australian oil-and-gas producer said Thursday it now expected to produce between 57 million and 60 million barrels of oil equivalent in 2017, against an earlier guidance of 55 million-60 million and despite a 5.1% drop in production in the first half of the year.
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Santos also forecast sales volumes for the year would be between 75 million and 80 million barrels, narrowing earlier guidance for sales of 73 million-80 million.
Santos, which has been fighting to cut a debt burden built up in recent years investing in new energy projects including the GLNG gas-export project in eastern Queensland state, said it had reduced debt by US$600 million to US$2.9 billion since the start of the year.
Production costs had also been reduced to US$8-US$8.25 a barrel, from US$8.45 last year, and it said it now forecast its cashflow break-even mark for the year had fallen to US$33 a barrel of oil from US$47 at the start of 2016.
"These are strong outcomes that highlight Santos's ongoing transformation into a low-cost, reliable and high performance business," Managing Director and Chief Executive Officer Kevin Gallagher said.
The company has targeted a US$1.5 billion reduction in net debt by the end of 2019 through improved operating cash flows and from the sale of infrastructure and non core assets. It has tied its future to the GLNG operation that counts Total SA (TOT) among its partners, the Exxon Mobil Corp.-led (XOM) PNG LNG operation in Papua New Guinea and projects in northern Australia, Western Australia, and the Cooper Basin straddling South Australia and Queensland states.
Late last month, the company agreed to a strategic partnership with Chinese natural-gas distributor ENN Group Co. and private-equity firm Hony Capital aimed at assisting Santos and using the energy company to invest in gas fields and exports of liquefied natural gas. ENN and Hony snapped up more shares in Santos in May, lifting their collective stake to 15.1%.
Although Santos's production dipped over the first half of the year, it said sales revenue had jumped 22% on last year to US$1.45 billion as the average price for its products jumped.
Mr. Gallagher said the company had increased drilling activity in Australia's Cooper Basin and across the GLNG acreage, and the additional wells were expected to help boost production over the next few years.
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(END) Dow Jones Newswires
July 19, 2017 19:12 ET (23:12 GMT)