Santos profits plunge, CEO quits

Santos CEO David Knox

Santos CEO David Knox

Santos CEO David Knox has stepped down following significant profit drop.

Net profit for the Australian oil and gas company plummeted 82 per cent, with underlying profits also falling 88 per cent.

The dramatic fall came despite production volume increase of 13 per cent for H1, 2015. Sales volumes however did not reflect the increase in production, and fell 15 per cent over six month period to $1.6 billion.

The company cited the lower oil price and higher expenses – net finance costs blew out 172 per cent – as the two most significant factors contributing to the downturn.

The company’s stated that average realised oil price was US$60 per barrel, down from US$115 during the previous six months.

The results statement was quickly followed by a surprise announcement from the Santos Board that Managing Director and Chief Executive Officer, David Knox will step down.

“In light of the continuing pressure on the Santos share price in recent months and approaches from other parties concerning various assets and strategic opportunities, the Board has decided to conduct a full strategic review to examine all options to restore and maximise shareholder value,” the board’s statement said, adding that Santos Chairman, Peter Coates, will assume the role.

“We are undertaking a thorough strategic review of all options to restore and maximise shareholder value in the face of the continuing pressures on oil prices, globally,” Mr Coates said.

“Given that we have announced a succession process for David, I will lead the process and can assure shareholders that we will be acting with the greatest possible speed to determine the best course of action, but we will not be taking any short cuts.”

Mr Knox was quoted in today’s results release saying the company had been focused on tightening capex and improving productivity.

“We have been and continue to take appropriate steps to reduce costs further. We are also working closely with our suppliers and contractors towards that end. I am pleased to say we are on track to deliver our 2015 target of $180 million in gross supply chain savings,” he said.

“Tightly managing costs will continue to be a key focus as we work through the current oil price environment.”

The news comes after Santos on Tuesday announce first gas to train 1 at its GLNG project.

The GLNG project is on track for first LNG at the end of the third quarter of 2015 and within budget, according to today’s statement.

Santos’ board has agreed to pay an interim dividend of 15 cents per share fully franked 30 September 2015.

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