Santos share price slips on 42% profit drop in FY23 result

Profits come back down to Earth in FY23.

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The Santos Ltd (ASX: STO) share price has slipped into the red after the ASX oil share reported its FY23 result on Wednesday morning. Shares are trading down 1% at $7.33 at the time of writing.

Santos share price falls after weak result

  • Sales revenue dropped 24% to US$5.9 billion
  • EBITDAX (earnings before interest, tax, depreciation, depletion, exploration, evaluation and impairment) down 28% to US$4.1 billion
  • Free cash flow from operations down 42% to US$2.1 billion
  • Underlying net profit after tax (NPAT) down 42% to US$1.4 billion
  • Statutory NPAT declined 33% to US$1.4 billion
  • Final dividend of US 17.5 cents, up 16%

Santos advised that total revenue declined due to lower volumes and realised prices for its production. It also reported its unit production costs rose by 11% to US$7.61 per barrel of oil equivalent.

What else happened in FY23?

Santos reported that the Barossa gas project was now 67% complete, with the first gas expected in the third quarter of 2025. The pipeline that will deliver gas from the field to Darwin LNG was 68% complete, and more than 50% of the pipe had been laid.

The first Barossa well has been completed, and the second well is underway. Initial well flow rates are "in line with expectations".

When complete, Barossa is expected to add 1.8 million tonnes per annum to the company's LNG portfolio. The Santos share price has been affected by various stages of the Barossa project's progress and environmental attention.

Regarding the Pikka project, Santos said phase one was now more than 40% complete, with first oil expected in the first half of 2026.

The ASX oil share also said that phase one of the Moomba carbon capture and storage project "remains on track" for the first injection in mid-2024.

What did Santos management say?

Santos managing director and CEO Kevin Gallagher said:

Today's results demonstrate the capability of Santos to generate strong cash flow, develop major projects and deliver sustainable shareholder returns.

Our critical fuels are a necessary component in the energy security of Australia and Asia, and will be required to provide affordable and reliable energy whilst the world transitions to lower-carbon alternatives.

What's next for Santos?

The ASX oil share provided guidance for 2024. It expects to produce between 84 to 90 million barrels of oil equivalent (mmboe). Sales volume is expected to be between 87 to 93 mmboe.

Santo expects capital expenditure related to sustaining capital, including decommissioning, to be around US$1.25 billion. Major project capital expenditure, including Santos Energy Solutions, is expected to be around US$1.6 billion.

The company's guides for unit production costs are between US$7.45 to US$7.95 per barrel of oil equivalent.

Santos share price snapshot

Prior to today's movements, the Santos share price had climbed 8.7% over the past year, compared to a 3.8% rise for the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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