The pain of rising gas prices for Australia’s east coast consumers has been Santos shareholders’ gain in the form of a 33 per cent dividend hike.
The head of Santos, Australia’s second largest oil and gas company, said prices did not have to rise too high or for too long, but governments had to ease restrictions on exploiting new fields.
Santos lifted its first half underlying profit by three per cent to $258 million on the back of higher sales and domestic prices.
One-off writedowns to a coal seam gas project in Indonesia the company had withdrawn from sent the net profit down 24 per cent to $206 million for the six months to June 30.
It lifted its interim dividend from 15 to 20 cents per share, partly because extra cash was flowing in from the new Papua New Guinea liquefied natural gas (PNG LNG) project that it is a partner in.
The companies building Australia’s new LNG projects for export, including Santos, have faced fierce criticism from local gas users.
Manufacturers face a shortage of domestic gas and high prices despite the nation’s total gas production nearly quadrupling in the next few years.
Santos CEO David Knox said the solution was to increase supply but that was a problem in NSW, which faces a gas shortage but where Santos is struggling to get its large $1.2 billion Narrabri project approved by the state government.
Australia could enjoy a gas boom that helps manufacturing as North America had through unconventional shale gas that had kept domestic prices down, if supply increased.
‘The poster child right now is NSW, where we are very keen to get on with that project but are not able to move forward right now at the pace we would like to,’ he told reporters.
Unconventional gas projects such as Narrabri’s and America’s shale industry are controversial because opponents say they contaminate water and soil.
Santos realised a domestic gas price of $4.91 a gigajoule in the first half, which is up from $4 in recent years and tipped to rise to $9 as Queensland’s three new LNG plants start up.
Morningstar analyst Mark Taylor said Santos was operating well and would continue to realise far better gas prices, with its large Gladstone LNG project due to come online next year.
Mr Knox said the company had performed well in the first half and reaffirmed guidance for a lift in full-year production to between 52 and 57 million barrels of oil equivalent.
Santos shares closed 57 cents, or 3.9 per cent, higher at $15.16.