MELBOURNE, Aug 21 (Reuters) - Australia's Santos Ltd STO.AX said it expects to start producing at its flagship $18.5 billion Gladstone liquefied natural gas project around late September, as it reported a worse than expected 88 percent drop in half-year profit.
Underlying net profit slumped to A$32 million ($23 million)for the six months to June from A$258 million a year earlier, hit by sliding oil prices and a rise in exploration spending.
The result was just over half of what four analysts on average had expected, at around A$58 million.
Santos cut its interim dividend by a quarter to 15 cents a share, but kept a fully underwritten dividend reinvestment plan in place so the funds would not have to be paid out.
Santos, whose share price has slumped by a third this year, is under pressure to cut spending to shore up its balance sheet, after it said it has no plans to raise equity.
Its Gladstone LNG project is one of the world's first three coal seam gas-to-LNG projects, all located in Australia's Queensland state, starting up just as oil prices have sunk to 6-1/2 year lows. The slump has depressed prices for LNG, which are linked to oil.
($1 = 1.3633 Australian dollars)