Energy giant Santos will not pay a dividend after plunging to a $US1.1 billion ($A1.4 billion) half year loss on the back of lower oil prices and a large impairment against its massive new LNG project.
The huge loss compares to a $US30 million profit a year earlier. Revenue in the six months to June dropped six per cent to $US1.19 billion, despite sales volumes rising by a third.
Santos had earlier this week outlined a $US1.5 billion non-cash impairment charge against the carrying value of its Gladstone LNG terminal in Queensland because of lower oil prices, a slower-than-planned ramp-up in production and higher costs of sourcing gas from other parties.
Production at the $18.5 billion project started in September 2015, but its prospects have been squeezed by weak oil and gas prices and uncertain supplies from Santos' own coal seam gas wells.
Santos is the operator and holds a 30 per cent stake in GLNG, with Malaysia's Petronas, France's Total and South Korean KOGAS the other investors.
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Recently appointed chief executive Kevin Gallagher said on Friday the company's short term priority is to stabilise the business and increase operating cash flow.
"The results reflect the impact of lower-for-longer oil prices," he said.
"At the moment, the best thing we can do for the business is to continue to take costs out."
The company's production costs were down 15 per cent from a year ago, and Santos remains on track to end the year with cash break even at an oil price of $US43.50 a barrel. It is ultimately targeting a break even between level of $US35 to $US40 a barrel.
Net debt was cut by $US220 million in the half year to $US4.5 billion.
Santos still expects to produce 57 million to 63 million barrels of oil equivalent in 2016, and has slightly lowered its guidance for production costs to $US9-$US10 per barrel.
Its interim dividend payment was suspended, which Santos said was consistent with its revised dividend policy of linking payouts to underlying earnings.
Santos shares were down 1.5 cents at $4.935 at 1445 AEST.
WEAK OIL PRICES WEIGH ON SANTOS
* Net loss of $US1.1b vs $US30m profit
* Revenue up 6pct to $US1.19b
* No interim dividend, down from 15 cents
