The broker said total production of 13.8mmboe was marginally higher than its forecast of 13.6mmboe due to higher gas production, however, sales revenue of $347 million was slightly below its forecast of $354 million due to a lower realised oil price.

Santos' quarterly result was buoyed by stronger margins from its US gas business and the flow through effects of an oil optimisation plan designed to maintain and increase oil production during the current high oil price environment.

"Recently Santos' share price has appreciated sharply driven largely by the current high oil price environment, but also due to the strong news flows, particularly the final approval for the Bayu-Undan LNG project," JB Were analyst Anthony Bishop wrote in a recent performance review.

"Looking forward the company will focus on optimising production and keeping a lid on Opex whilst progressing growth options. We maintain our short term Market Perform and long-term Hold recommendations."

Santos has busy exploration schedule. The 2003 exploration program was to drill 26 wells for a total expenditure of $146 million. Of the original 26 wells, five have been deferred and two wells have been added to the program.

Included in the program for the remainder of 2003 are three wells being drilled in the frontier Otway and Kutei Basins. About one-third of the total 2003 exploration program is being drilled in areas where Santos does not presently have production.