Santos & Oil Search

A good article on Santos reported today, I for one hope there is a bid for Oil Search but I wonder when it will come if it does.

Santos slips, says it'll do better next time
By Jane Counsel
August 15 2002

Santos has foreshadowed a stronger second half result to offset a weaker interim profit of $162.6 million, beaten down by lower oil prices and reserve depletion charges.

The result for the six months to June 30, down 35 per cent on the record $252 million struck previously, came in at the lower end of market expectations, although the company achieved record production and first-half gas sales.

Although shares dipped 14c to $6.32 on the back of the interim profit, the company's managing director, John Ellice-Flint, was upbeat about the result.

"This is a very solid first half result notwithstanding the lower world oil price, which is obviously a factor outside of our control, and increased depletion charges," he said.

"However, we are making good progress in the areas we can control, such as production, costs and exploration."

Although Santos realised an average oil price almost $11 a barrel lower than the previous corresponding first half, the company expects a stronger second half result due to the recent pick-up in the spot oil price and through higher production.

Santos is continuing to assess options to expand its business but Mr Ellice-Flint would not comment on market speculation it was reconsidering a possible takeover bid for Oil Search. Its $642 million takeover attempt earlier this year failed.

This comes amid talk that the new Papua New Guinea Government is considering selling its 18 per cent stake in Oil Search.

Securing the Government's Oil Search stake would be a good starting point in Santos's efforts to get back into the $6.8 billion PNG-to-Queensland gas pipeline project. It was kicked out earlier this year over differences of view on marketing plans.

Its earlier failed bid for Oil Search was seen as an attempt to regain control of the project, which will directly compete with Santos's core Cooper Basin assets in South Australia if it gets up.

Meanwhile, Santos is continuing efforts to replace declining output from its maturing Cooper Basin assets and is boosting its exploration spend from $117 million to a record $140 million in the second half, buoyed by its first half exploration successes.

Santos has declared a fully franked interim dividend of 15c a share, payable on September 30.