Australian oil and gas producer Santos (STO.AX) reported a smaller-than-expected drop in its first-half profit and forecast higher production in the second half as its Barossa and Pikka projects ramp up.
It is also looking at a final investment decision at the Papua LNG project in Papua New Guinea shared with ExxonMobil (XOM.N) and operator TotalEnergies (TTEF.PA) before the end of the year.
The project, which has seen cost blowouts and delays, will be made up of three 1.33-million-metric-ton processing plants beside the existing PNG LNG project, operated by ExxonMobil and shared by Santos.
In an earnings call CEO and Managing Director Kevin Gallagher said the year was "shaping up to be a tale of two halves" with company output expected to be 20% to 30% higher in the second half of the year.
After a stronger performance in July he expected the Barossa field, which feeds the 3.6-million-ton-per-year Darwin liquefied natural gas plant, to reach its top capacity of 600 million cubic feet per day, from 550 million cfd currently.
In Alaska, the Pikka oil field will also climb toward its planned capacity of 80,000 barrels per day from current production of 23,000 bpd.
MST Marquee analyst Saul Kavonic said in a note that if either took longer than expected to reach nameplate capacity there could be "more downside to guidance".
Santos reiterated its overall annual production forecast in the range of 99 million barrels of oil equivalent (boe) to 105 million boe.
For the six-month period ended June 30, the company posted an underlying profit of $397 million, beating Visible Alpha's consensus estimate of $337.13 million. That compared with $508 million a year earlier.
It declared an interim dividend of 11.6 cents per share.
Stronger second-quarter Japan Crude Cocktail (JCC) pricing is expected to boost realised LNG prices and cash flow in the second half, given 80% of its LNG contracts are oil-linked with a three-month lag.
Oil and LNG prices rose sharply during the second quarter due to disruptions from the U.S.-Iran conflict. Oil rose 50% alone in March.
Analyst estimates, compiled by Visible Alpha, predict 167% growth from last year thanks to the oil-linked LNG contracts.
Santos shares climbed 2.9% in early trade, compared with a 0.7% decline in the ASX 200 benchmark index (.AXJO).
