The Santos Ltd (ASX: STO) share price is in the red after the company released its latest quarterly earnings, detailing record first half production, revenue, and cash flow.
Shares in the ASX oil and gas share have fallen 0.24% to trade at $7.37 at the time of writing.
Santos share price dips despite record first half
Here are the key takeaways from Santos' June quarter:
- Quarterly revenue of around US$1.88 billion – 74% higher than that of the prior comparative period
- First half revenue came to a record US$3.77 billion – 85% higher than the same period of 2021
- Produced 25.5 million barrels of oil equivalent (mmboe) in the quarter – a 2% drop on that of the March quarter
- First half free cash flow came to US$1.7 billion – a 199% increase
The company's revenue for the June quarter was flat with the previous quarter's as higher commodity prices offset lower sales.
Meanwhile, the company's oil production slipped due to natural field decline at Bayu-Undan and planned maintenance outages at PNG LNG, Darwin LNG, and the Cooper Basin. Though, its production jumped 9% to 51.5 mmboe over the six months ended June.
Santos' sales volume came to 27.5 mmboe last quarter – a 2% drop. It increased 4% over the first half, coming in at 55.7 mmboe.
Finally, Santos achieved sustaining annual merger synergies of US$95 million in the first six months of its marriage to Oil Search. It previously targeted maximum synergies of US$115 million.
What else happened in the quarter?
The Santos share price slipped 4% over the second quarter, outperforming the S&P/ASX 200 Index (ASX: XJO) by 8%.
The major news from the company in that time came in mid-April. Then, Santos announced a US$250 million on-market share buyback.
As of the end of June, US$174 million of the buyback had been completed.
Additionally, the company's Barossa project is 40% complete, on schedule, and on budget. Meanwhile, its Pikka Phase 1 project in Alaska has advanced front end engineer design (FEED) work and is ready for a final investment decision.
Looking to the greener end of the business, Santos' Moomba carbon capture and storage (CCS) project is 18% complete, on schedule, and on budget. Progress is also being made on the Bayu-Undan CCS project.
What did management say?
Santos managing director and CEO Kevin Gallagher commented on the news driving the company's share price today, saying:
Santos is positioned as a leading and reliable LNG supplier into Asia and we are well placed to take advantage of growing Asian demand for LNG, which is forecast to double by 2050.
Our new capital management framework announced in April combined with strong free cash flows position us well to provide returns to shareholders at the half-year results in August.
What's next?
The Santos share price might be being weighed down by the company's newly updated guidance.
It now expects to produce between 102 mmboe and 107 mmboe in 2022. That's relatively in line with its previous production guidance of between 100 mmboe and 110 mmboe.
On top of that, Santos has lowered its production cost guidance to between US$7.90 and US$8.30 per barrel.
However, the company has also dropped its sales guidance. It now expects to sell between 110 mmboe and 116 mmboe this year. Previously, its top line guidance was 120 mmboe.
Santos share price snapshot
The Santos share price has outperformed the broader market so far this year.
It has gained around 11% year to date. It's also currently nearly 12% higher than it was at this point last year.
Meanwhile, the ASX 200 has slipped 11% year to date and 7% over the last 12 months.
