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Santos profit triples on energy insecurity

The federal government has laughed off criticism of its new energy laws as "Soviet-style", saying gas giants just want to keep hold of their record profits.

The federal government has laughed off criticism of its new energy laws as "Soviet-style", saying gas giants just want to keep hold of their record profits. Photo: AAP

Santos is reaping the gains of energy instability at home and abroad with a record result in the first half of 2022.

The oil and gas company on Wednesday reported record production, earnings, cashflow and a tripling in underlying profit in the six months to June 30 on increased demand and rising prices.

Chief executive Kevin Gallagher told an investor briefing the world has changed since Santos last reported in February, with war in Ukraine driving inflation, disrupting markets and causing price volatility in oil and gas.

“There has been a significant shift in global energy policy towards energy security as a key priority,” he said.

Adelaide-headquartered Santos reported a half-year net profit after tax of $US1.167 billion ($A1.66 billion) for the first half of the financial year, up 230 per cent and an underlying profit of $US1.267 billion ($1.8 billion), up 300 per cent.

The company also announced a final investment decision has been taken to proceed with the Pikka Phase 1 oil project in Alaska, which it disclosed would cost more than expected.

Mr Gallagher said Pikka would be “net zero from first production” using carbon offset projects and carbon capture and storage.

But Santos has deferred an investment decision on Dorado in the Bedout Basin, off the West Australian shore.

“Pikka won the race on economics and readiness,” Mr Gallagher said.

Shares in Santos fell 15 cents or 2.1 per cent to $6.93 in early afternoon trade.

Quizzed about the controversial Narrabri gas project in NSW, he said Santos continues with planning and resource appraisal, and is seeking pipeline licences.

“Narrabri is a very strong project – they can supply affordable gas to NSW customers,” Mr Gallagher said.

But he said Santos would not commit significant capital until all approvals are secured.

Free cashflow for the oil and gas company was $US1.708 billion ($A2.4 billion), up 230 per cent.

Following the merger with Oil Search completed in December, Santos operates across Australia, Papua New Guinea, the Himalayas and North America.

Santos said there had been higher interest in Papuan LNG following the merger, and flagged the upcoming sale of a 5 per cent stake in that business unit.

“We estimate this (stake) is worth more than $US1.25 billion,” RBC Capital Markets analyst Gordon Ramsay said.

“We see TotalEnergies, and possibly ExxonMobil or its other Japanese PNG LNG project partner as the natural buyers.”

Mr Gallagher said Santos was also open to selling down Pikka before first production.

Sharing the first-half gains, Santos upped its dividend payout and announced an increased share buyback – up from $US250 million ($A356 million) to $US350 million ($A498 million).

The interim dividend soared 38 per cent to US 7.6 cents (10.8 cents) per share unfranked.

“This reflects our commitment to delivering increased returns to our shareholders, particularly during period of crisis,” chief financial officer Anthea McKinnell said.

Amid regulator concerns about domestic gas prices and supply, Santos said the company’s average realised east coast domestic gas price rose 22 per cent to $6.49/GJ, and was down five per cent to $4.09/GJ on the west coast.

– AAP

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