Santos signals earnings impact from 'retrospective' tax changes

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Production reached a record of 18.4 million barrels of oil equivalent, up 33 per cent from a year earlier, but was hit by cyclones in Western Australia and some plant outages in the Cooper Basin.

JPMorgan analyst Mark Busuttil also said the prices Santos got for its products were lower than he expected, with the result that sales revenues fell 3 per cent short of his expectations. Production and sales volumes were in line with estimates, he added.

But Bernstein's Neil Beveridge said price were higher than his expectations and described production and sales as "solid".

Santos also maintained full-year guidance for production of 71 million-78 million boe, and for sales, although Mr Busuttil noted that the March quarter result was "towards the bottom of the ranges". Capital spending this year was kept at about $US1.1 billion, while guidance for upstream production costs was also unchanged.

Santos CEO Kevin Gallagher says the integration of Quadrant Energy is going well. Philip Gostelow

Shares in the Adelaide-based oil and gas producer were up 1 per cent at $7.14 at 2:47pm AEDT.

The quarterly figures follow Santos's announcement on Tuesday of a major gas discovery at the Corvus-2 well off Western Australia, while it also reported success at the Muruk-2 well in Papua New Guinea.

Cash flow during the quarter reached a record $US327 million. Some $US1.1 billion of gross debt was repaid over the three months, partly funded by a $US600 million bond sale. Net debt fell to $US3.4 billion by the end of the quarter.

Chief executive Kevin Gallagher said the integration of the Quadrant business is proceeding well, and Santos is on track to achieve targeted savings.

"In the second quarter, we look forward to continued drilling success, including commencing appraisal of the exciting Dorado oil discovery offshore Western Australia,” he said, referring to drilling planned with Carnarvon Petroleum on the eastern fringes of the Carnarvon Basin.

The price Santos got for its oil slipped to $US65.50 a barrel in the quarter, down from $US71.56 a year earlier. Prices for condensates, domestic gas and liquefied petroleum gas were also lower, while the LNG price rose to $US10.79 per million British thermal units, up from $US8.19 in the first quarter of 2018 but slightly softer than in the December quarter.