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Santos posts strong first half results, connecting Australia’s first commercial shale gas well

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Santos (ASX: STO) has marked both a stronger underlying net profit of A$283 million for the half-year ended 30 June 2012, up 20% over the previous corresponding period, and a milestone with Australia’s first commercial shale gas well.

The higher underlying net profit, which beat the $272 million average of six analysts' forecasts compiled by Dow Jones Newswires is due to higher gas and liquids prices and sales volumes that were partially offset by the higher costs of sales and exploration expenses.

Net profit for the quarter was down 48% to A$262 million due to a A$246 million gain on asset sales in the half-year ended 30 June 2011. Likewise, earnings per share were down 52% to A$0.276.

Production for the period was up 11% to 25.4 million barrels of oil equivalent due to on-time project start-ups, record Western Australian gas production and progress in the recovery of production that was constrained during 2011 by flooding in the Cooper Basin.

This translated to a 27% increase in revenue to A$1.49 billion.

Shale gas milestone

In the Cooper Basin, Santos is connecting the Moomba-191 shale gas well, which flowed at a stabilised rate of 2.6 million cubic feet of gas per day (MMcfd) during testing, into existing gas gathering infrastructure that is located within 350 metres.

While other companies have flowed gas from shale gas wells, Santos will be the first to tie a shale well into gas gathering infrastructure.

Moomba-191 is a dedicated shale well that flows from the Roseneath, Epilson and Murteree shale targets.

It was drilled to a depth of 3,010 metres with the aim of appraising the gas potential of the REM unconventional gas targets in the Moomba North area.

Thickness and properties, including gas content, of the REM were consistent with pre-drill expectations, reflecting the company’s extensive technical understanding due to its long involvement and operation of conventional activities in these fields.

Each of the REM intervals was fracture stimulated and monitored via microseismic in an adjacent well, allowing Santos to gather valuable data to assist in the design of future shale gas wells, including a dedicated horizontal shale gas well in the Moomba North area planned for early next year.

Gas flow rates included a peak of 3MMcfd and are excellent considering that Moomba-191 is a vertical shale well primarily designed for data gathering.

 

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