SANTOS'S full-year net profit has fallen 16 per cent to $643 million because of the Indonesian mud-flow disaster and accounting charges.
The Adelaide company's underlying profit to December 31 rose 7 per cent to a record $683 million on revenue of $2.8 billion, up 12.3 per cent.
Santos managing director John Ellice-Flint said yesterday the underlying profit was not more impressive because of depreciation costs.
However, operational performance had been "excellent", with record production of 61 million barrels of oil equivalent and increased reserves.
"The reported net profit of $643 million was $40 million below the underlying net profit due to three factors, namely a net provision for the Banjar Panji incident of $67 million, an impairment writedown of $14 million and a gain on asset sales of $41 million," the company said.
Santos has increased its provision for the Banjar Panji mud-flow incident, which involved the breaching of a joint-venture partner-operated gas well in Indonesia in May, from $24 million to $89 million.
Mr Ellice-Flint said the ultimate total cost could not be accurately assessed and the prospect of the mud flow being curtailed was also unknown at this stage.
Santos said it would scale back its exploration program this year from 25 wildcat wells to about 14.
"This reflects the strategic focus on shorter-lead-time-exploration plays at a time when offshore rig rates are at an all time high and a focus on an improved risk/return equation through near-field exploration programs such as Cooper Oil," Mr Ellice-Flint said.
"Our 2007 development program includes an increasing level of activity in the Cooper Basin Oil Project, the Fairview field development, phase four of the Mutineer-Exeter field development and the Cooper Basin gas-development program."
Mr Ellice-Flint said offshore rig rates were running at up to $550,000 per day at the moment.
Santos expects to maintain production at 59-61 million barrels of oil, following the planned sale of its U.S. interests.
"Beyond that, we see moderate growth into the next decade, followed by a step change as liquefied natural gas projects in Papua New Guinea and Darwin come on line," the company said.
Mr Ellice-Flint said the company was still interested in growing through acquisitions in the coal-seam gas sector, despite its bid for Queensland Gas Company being blocked by the competition regulator this week.
Santos said early results from the Cooper Oil project - drilling up to 1000 wells by 2010 - were encouraging with 15 milion barrels of proved and probable oil reserves, or twice the targeted amount, already added.
Santos will pay a fully franked 20c dividend on April 2. Its shares fell 3c to $10.02 yesterday.
source news : news.com.au
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