Australian oil and gas producer Santos (ASX: STO) announced on Thursday a decline in first-quarter revenue, citing lower production across its product portfolio and reduced volumes in recent months. The company highlighted severe weather events and planned maintenance activities as primary factors impacting production, while sales revenue was primarily affected by decreased liquefied natural gas (LNG) and ethane volumes, partially offset by higher realised prices.
In the quarter ended 31 March 31 2024, Santos produced 21.8 million barrels of oil equivalent (mmboe), a slight decrease from the 22.2 mmboe recorded in the same period a year earlier. Sales volume stood at 23.2 mmboe, down from 23.8 mmboe in the prior corresponding period.
The average realised price for LNG dropped to AU$12.68 per million British thermal units (mmBtu), compared to AU$14.46 per mmBtu in the previous year. This decline in price contributed to the reduction in sales revenue, which totaled AU$1.40 billion for the three-month period, down from AU$1.63 billion a year ago. However, despite the decrease, the reported figure surpassed the Visible Alpha consensus estimate of AU$1.37 billion, according to Citi.
Santos' performance in the first quarter reflects the challenges faced by the company in maintaining production levels amidst various operational hurdles. Severe weather events, such as storms or cyclones, can disrupt offshore drilling operations and impact production schedules. Additionally, planned maintenance activities are essential for ensuring the integrity and efficiency of production facilities but can temporarily reduce output.
The decrease in sales revenue due to lower LNG and ethane volumes underscores the importance of production stability and market demand for Santos' products. While higher realised prices partially offset the decline in volumes, maintaining consistent production levels remains crucial for sustained revenue generation.
Looking ahead, Santos aims to address the challenges encountered in the first quarter and optimise its production operations to enhance performance in subsequent quarters. The company's strategic focus on exploration, development, and production activities will play a vital role in overcoming operational challenges and driving future growth.
Despite the revenue decline in the first quarter, Santos remains a key player in the Australian oil and gas industry, contributing significantly to the country's energy sector. With operations spanning across Australasia, Europe, and North America, the company continues to play a pivotal role in meeting global energy demand while navigating operational challenges and market dynamics.