The Santos Ltd (ASX: STO) share price is gaining on Thursday after the company revealed a record third quarter.
Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas giant are currently trading for $7.56, 2.44% higher than their previous close.
Santos share price rises on US$1b of free cash flow
Here are the key takeaways from the company's September quarter:
- Production reached 26.1 million barrels of oil equivalent – up 2% quarter on quarter
- Sales revenue lifted 15% to US$2.15 billion
- Year to date sales revenue reached a record US$5.9 billion – up 86% year-on-year
- Free cash flow came in at a record US$1 billion for the quarter
- Year to date, free cash flow sits at US$2.7 billion – a 194% year-on-year improvement
- Sales volumes lifted 9% quarter-on-quarter to 29.9 million barrels of oil equivalent
Higher commodity prices and strong third quarter production saw Santos post record quarterly free cash flow and sales revenue. Higher LNG and domestic gas prices were partially offset by lower oil prices over the period.
Its average realised LNG price came in at US$16.76 per million barrels of oil equivalent and its realised price for domestic gas reached US$5.97 a gigajoule. Looking at crude oil, the company's average realised price was US$108.21 a barrel last quarter.
The quarter's record free cash flow saw the company's gearing reduced to 20.8%.
Its Cooper Basin third-party oil volumes slipped last quarter after revised crude oil processing agreements were implemented. Though, that was offset by increasing east coast sales gas purchases.
Production was boosted due to an increase in Western Australia domestic sales gas customer nominations and higher PNG production, partially offset by wet weather impacts in the Cooper Basin and Queensland.
What else happened in the September quarter?
The quarter just been was a rough one for the Santos share price. It dumped 4.45% over the period.
The company also received an offer from a party looking to acquire a 5% stake in PNG LNG for an asset value of US$1.4 billion.
Meanwhile, its Barossa drilling operations were suspended following a Federal Court decision to set aside the regulator's approval of the environmental plan. Santos is appealing the decision.
The company also revealed the final investment decision for the Pikka Phase 1 project in Alaska in August. Drilling at the project is expected to begin in the June quarter.
What did management say?
Santos managing director and CEO Kevin Gallagher commented on the update driving the company's share price today, saying:
Energy security is a top priority for countries in our region. Given the ongoing strong customer demand for our product now and into the future, Australia's role as a major energy-producing nation has never been more important.
As the world sees strong demand for our products, we continue to focus on the critical dual purposes of delivering the energy the world needs while investing to decarbonise the energy supply chain.
What's next?
The company also updated its 2022 guidance today.
Its production guidance was dropped to between 103 million barrels of oil equivalent and 106 million barrels of oil equivalent.
The company's sales volume guidance was also lowered to between 110 million barrels of oil equivalent and 114 million barrels of oil equivalent. That's due to the implementation of revised Cooper Basin crude oil processing agreements. Santos assures the change won't impact profits or cash flow.
Finally, the company's major project's capital expenditure guidance was lowered to between $1.15 billion and $1.25 billion.
Santos share price snapshot
The Santos share price has been outperforming so far this year.
It has gained 14% since the start of 2022. It's also trading around 4% higher than it was this time last year.
Meanwhile, the ASX 200 has dumped 10% year to date and 8% over the last 12 months.
