Gas and oil producer Santos is cutting its 2015 capital expenditure plans by $700 million to $2 billion following the substantial fall in oil prices.
CEO David Knox said Santos is on track to realise cash flow benefits in 2015 and 2016 from growth investments.
“The PNG LNG project is producing at full capacity,” he said. “The GLNG project is 90% complete and remains on track for first LNG in the second half of 2015. First commissioning gas is expected to be introduced to the LNG plant before the end of 2014. Offtake agreements are in place with large, well-capitalised buyers.”
Santos has about $2 billion in cash and undrawn debt facilities available.
Standard & Poor’s this week reduced the credit rating of Santos’ senior debt this week to BBB from BBB+.
Knox notes the rating is the same as that for Origin Energy, Amcor, AGL Energy, Crown Resorts and Boral. S&P in their announcement noted Santos’ track record of a conservative funding approach, favourable debt maturity profile and adequate liquidity.
He says asset sales are under consideration as part of the company’s ongoing portfolio management provided fair long-term value is realised.
“To be clear, the underlying performance of our business remains strong with production continuing to grow in the second half of this year,” Mr Knox said.
“The current volatile oil price means that Santos is focused on driving operational efficiency, reducing costs, prudently managing capital and making sure our balance sheet remains strong – without making short term reactive decisions that could damage the long term interests of the company or the interests of shareholders.”
Santos is down 4.46% today to $7.29. Its shares have lost 42% in value in the last month.
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