Australian energy company Santos has recorded a US$1,104 million (A$1.4 million) first half net loss caused by the massive impairment charge on its LNG export facility in Queensland and the lower oil prices.
Managing Director and Chief Executive Officer Kevin Gallagher said excluding impairments and other one-off items, the company recorded an underlying net loss of US$5 million after tax for the first half.
“When I joined the company in February, I said the first priority was to assess the company’s assets and deliver the appropriate organisational structure to ensure that Santos is sustainable in a low oil price environment,” Mr Gallagher said.
“Our goal is to be free cash flow breakeven at between US$35 to US$40 per barrel on a portfolio basis. We have made good progress in the first half towards this goal and are forecasting a free cash flow breakeven oil price of US$43.50 per barrel for 2016, down from US$47 per barrel.”
According to him, the establishment of the new operating model will lift productivity and drive long-term value for shareholders in a low oil price environment.
“Our asset-focused model is supported by strong technical capabilities in exploration, development, production and commercial. The appointment of the new Executive team (Excom) was a key step in establishing the new operating model,” Mr Gallagher added.
“Our progress is also evidenced by record production and significant cost reductions achieved in the first half: unit upstream production costs were down by 15% to US$8.80/boe and capital expenditure down by 58% to US$283 million.”
He said despite the visible progress towards achieving financial stability, there was still a lot of work to be done.
“Our near-term focus is clear: embed the new operating model, drive down costs and apply available cash flow to reduce debt,” Mr Gallagher pointed out.
“I am confident we are taking the right steps to ensure Santos becomes a strong and sustainable business,” Mr Gallagher said.