Santos: Oil and gas company to cut costs by $US150m as profit slips

Santos plans to slash costs by up to $US150 million ($240m) over the next two years and boss Kevin Gallagher has again played down the prospects for WA’s Dorado oil project.

The Adelaide-based petroleum company posted a 14 per cent profit fall to $US1.2 billion in 2024, and shares were down 4.5 per cent to $6.58 at the close of play.

Revenue dipped 9 per cent amid a decline in production by about 5 million barrels of oil to 87mmboe.

The bid to cut costs follows a round of job losses in WA reported last year and a move to punt the Dorado oil project off the Pilbara coast far into the future.

It’s understood the company had not yet decided where the savings will come from.

Santos will run a “thorough review” of costs with a focus on bringing on new technology, chief financial officer Sherry Duhe said.

“We are targeting $US100m to $US150m in annual savings from our operating costs and our sustaining capex,” she said.

“This is as we emerge from the past few years of major acquisitions, integrations and major project development.”

Chief executive Kevin Gallagher said the company would particularly target its corporate centre, which is in Adelaide. He was touting a “low-cost, disciplined operating model” to investors on Wednesday.

Santos will drill two wells at the Dorado oil project in the Bedout Basin and other potential prospects in the Northern Territory’s Beetaloo Basinnext year.

The $3b Dorado development with Carnarvon Energy and CPC Corporation has struggled to get off the ground, despite a final investment decision previously being tipped for mid-2022.

“What we’re showing you here is a lot of choice,” Mr Gallagher said.

“We’ll re-evaluate through 2026 what the next cab off the rank is.”

He hinted that Dorado may not come online until at least 2030 — with PNG, Pikka in Alaska, and Beetaloo likely ahead in the queue.

Work on the Barossa field in the Timor Sea is 91 per cent complete, with the gas to be processed through the Darwin LNG plant. Mr Gallagher said three wells had been completed but work on the final well was suspended.

UBS analyst Tom Allen welcomed the move to cut costs but questioned whether Santos had gone far enough.

“The result is operationally in line, albeit the miss to underlying profit (due to higher taxes) could see the stock trade marginally weaker today,” he said.

“The new information is a cost reduction initiative targeting US$100-150m in annual structural savings over the next one to two yrs.

“While this meets market expectations for cost-out, it misses the opportunity to be bigger & broader than expected.”