Santos Beats Expectations Despite Project Delays

Santos, one of Australia's biggest liquefied natural gas (LNG) producers, reported a steadier profit in the first half despite facing commissioning delays on key growth projects. The company's underlying profit for the six months ended June 30th was $397 million, down from $508 million a year earlier but ahead of Visible Alpha's consensus estimate of $337 million.

The delayed Barossa gas project and Pikka oil project were expected to drive second-half output, but management still expects a 20-30% increase in production. However, the swing factor now is pricing, as many LNG contracts are tied to Japan Crude Cocktail (JCC), which typically resets with a three-month lag.

This means that stronger oil pricing in the second quarter can boost Santos' realized LNG prices, earnings, and cash flow later in the year. Analyst estimates compiled by Visible Alpha still point to 167% growth from last year as the oil-linked pricing feeds through.