SANTOS says it is so confident Australian
east coast gas prices will rise that it is using prices close to $9 a
gigajoule - which is two or three times current gas prices - to
assess its gas reserves.
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| Santos and CEO David Knox are relying heavily on the eastern states' gas prices rising. |
Chief financial officer Andrew Seaton said the
company was very comfortable internally that gas prices would rise to
its publicly stated forecast of between $6 and $9 a gigajoule beyond
2015 when three big liquefied natural gas projects in Gladstone start
sucking up most of the east coast's gas.
"We use a gas price towards the upper end of
that range," Mr Seaton said.
"We're seeing evidence in the market already
that prices are being signed in that range."
The Australian recently reported Origin Energy
sold miner MMG gas at a price that rises to $9 a gigajoule once the
LNG plants are up and going.
Neither Origin nor MMG has confirmed or denied the
price.
Gas prices are now between $3 and $4 a gigajoule.
Santos said 2012 net profit fell about a third due
to an absence of assets sales that boosted the previous year's
result.
Net profit fell 31 per cent to $519 million but
underlying profit, which excludes one-off gains and losses, rose 34
per cent to $606m. The underlying figure beat the $586m average of
eight analysts' forecasts compiled by Dow Jones Newswires.
Underlying earnings were lifted by two natural gas
projects coming online in Indonesia and Western Australia,
accelerating a shift by Santos away from oil production as a key
driver of earnings.
Santos is also a major shareholder in two
multi-billion-dollar gas-export projects in Papua New Guinea and
Australia, slated to start production in 2014 and 2015 respectively.
Santos shares were up 24c, or 2 per cent, at
$12.14 today.
Santos said the Gladstone LNG gas-export project
in Queensland, which counts Total SA and Petroliam Nasional as
shareholders, is on track to ship its first cargo of LNG in 2015 and
remains on its recently revised budget of $US18.5 billion.
Chief executive David Knox stressed Santos would
not need to raise equity to finance its share of the funding for
GLNG.
Mr Seaton said GLNG was not looking at selling
infrastructure, moves which its two LNG rivals, BG Group and Origin
Energy/ConocoPhillips, have flagged.
Santos said it increased its proven and probable
(2P) reserves to 1.406 million barrels of oil equivalent, from 1.364
million a year earlier, representing what it said was an annual 180
per cent reserve replacement rate.
But it was forced to almost halve contingent
reserves at the GLNG project from 3.277 million barrels of oil
equivalent to 1.638 million.
"Reduction in GLNG and other Queensland coal
seam gas fields (was) from a technical reassessment of recovery
factors associated with deeper and/or lower permeability coals"
combined with new guidelines for calculating reserves, Santos said.
Mr Knox stressed the drop came from areas not
earmarked to feed into the LNG plant until 2025 or later.
Additional reporting: Dow Jones Newswires
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