Santos shrugs off recession fears, predicts growth
By Steve Larkin and Xavier La Canna06 May 2009 4:23 PM
ADELAIDE, May 6 AAP - Australia's third biggest oil and gas producer Santos Ltd says it will defy a global recession and target further growth.
The company will make substantial investments this year, chief executive officer David Knox said on Wednesday.
"We are going to invest $1.5 billion this year so we are in a very strong position and really moving forward with real pace," Mr Knox told reporters after the company's annual general meeting in Adelaide.
"As we go forward, one of my concerns is that other companies are really pulling back, they are dropping drilling rigs, they are reducing the amount of capital they are spending.
"When the recovery does come, and goodness knows when that will be, then there will be a shortage of energy and that will be a real concern."
Santos chairman Stephen Gerlach told the meeting production guidance for 2009 was between 53 and 56 million barrels of oil equivalent (MBOE), which is in line with last year's 54 MBOE.
Production is expected to remain steady until a "step-change" in 2014 when the GLNG (Gladstone liquefied natural gas) and PNG LNG (Papua New Guinea LNG) projects come online, he said.
Mr Gerlach told reporters Santos was in a good position to build on growth.
"This company has a strong balance sheet, it's not constrained by debt, the world is still doing projects ... if they make sense," Mr Gerlach said.
"And we are in a pretty good place, relatively, to proceed and try and build on the growth that we have actually got, potentially, in our projects."
Head of mining and resources research at Fat Prophets, Gavin Wendt, agreed with the up-beat assessment.
"They have been very well managed financially and conservative with their balance sheet," Mr Wendt said.
"A lot of their peers in the resources sector and elsewhere in the market have been leveraged to the hilt.
"So they (Santos) are very well off from a balance sheet point of view."
Mr Wendt said analysts were focusing on the GLNG project as the driver of growth at Santos.
At the meeting, shareholders voted for a proportional takeover clause to be written into Santos' constitution allowing a vote on any such bid.
In a proportional takeover a bidder can gain control of a company without all shareholders having the chance to sell all their stock to the bidder.
"This is just to make sure that if anyone was ever going to do that, and we don't know of anyone who is going to do that, but if they were, they would have to deal with all the shareholders not just king-hit a proportion of us," Mr Gerlach said.
Santos stood to benefit from the government's now-delayed carbon emissions trading scheme, he said.
"Overall the scheme is helpful to Santos and Santos shareholders and it's the right thing to do."
Santos posted an underlying net profit of A$572 million (US$424.02 million) in 2008, up 42 per cent.
Santos shares closed down 37 cents or 2.19 per cent at $16.54.
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