Australian oil and gas producer Santos on Thursday reported a 29% drop in first-half net profit as record production was more than offset by a strong Australian dollar and higher depreciation.
Santos said in a statement that profit before one-off items was A$305.2 million (US$246.13 million), down 24.9% from a year ago but above analysts expectations of around A$275 million. Reported net profit was A$262.2 million, down 29% from a year ago, Santos said.
Adelaide-based Santos reiterated its 2007 and 2008 production guidance of between 59-61 million barrels of oil equivalent (boe). The company produced 61 million boe in 2006.
Santos Managing Director John Ellice-Flint said in a statement the company would intensify its focus on the fast-growing liquefied natural gas market (LNG).
"LNG will play an increasingly important role as a higher value market for our gas, as evidenced by our proposal to develop an LNG export facility in Gladstone."
The company said in July it was planning a A$6 billion LNG plant using coal seam gas in the northeastern state of Queensland. The single-train plant would have an annual capacity of between 3-4 million ton per annum.
Santos also has a stake in a proposed Exxon Mobil-led LNG project in Papua New Guinea and a share in an operating LNG plant in northern Australia.
Santos, which produced a record 30.1 million boe in the first six months of the year, said sales revenue fell 7% to A$1.22 billion as the appreciation of the Australian currency dented the value of its U.S. dollar earnings.
Production costs per barrel rose 8% to $7.01 per boe.
Santos said it saw moderate organic growth beyond 2008, but its long-term growth profile would be boosted as the Dua and Blackbird oil projects in Vietnam, the Reindeer gas project in Western Australia and various LNG projects come onstream.
Santos has seen its share price fall about 3.8% since the start of the year, compared with a rise of about 17% in the broader S&P energy sector index.
The company has been looking to boost production from the aging Cooper Basin in outback Australia through a renewed drilling campaign. It has also begun to focus more on overseas projects, particularly in Indonesia and Vietnam, to boost its long-term production outlook.