First half EBITDAX (earnings before interest, tax, depreciation, amortisation and exploration) topped $1 billion for the first time, with a 45% jump from $695 million to $1.01 billion.

The higher profit was driven by record first half production of 28.7 million barrels of oil equivalent (MMboe), a 9% on-year increase, and Santos claims it is on target for 7% rise in full-year production to 60-61MMboe.

Santos’ interim dividend has again been increased, with directors declaring a fully franked payment of 20c per ordinary share – up 11% on the 2005 interim dividend and a 33% rise over the past two years.

Managing director John Ellice-Flint said the exceptional first half progress showed that Santos’ business was in sound shape and its strategies were delivering.

“We have achieved a 9% increase in production, and have managed our portfolio in a way that has seen us benefit from high commodity prices,” he said.

“Our transition from an onshore-focused company is evident. Within the next year we will operate four offshore producing projects, with two already online in Australia and another two to come online in Indonesia.”

Timor Sea

Ellice-Flint described the first liquefied natural gas production during the half from the Bayu-Undan project as a turning point for Santos.

“Not only will this project contribute to our earnings for much of the next two decades, it also provides an important growth option, and we are actively pursuing opportunities to commercialise additional gas resources in the area, such as the Caldita and Evans Shoal discoveries,” he said.

“We are working hard with our co-venturers to prove up sufficient resources to underpin an expansion of the Darwin LNG plant, and the second half will be extremely active in this area.”

Onshore oil and gas

Ellice-Flint said Santos had significant uncontracted gas reserves in eastern Australia – in both conventional and coal seam gas fields.

“These reserves are in all of the major basins supplying gas to the population and industrial centres in eastern Australia. In addition, we have significant contingent resources in both Australia and Papua New Guinea,” he said.

Following encouraging initial results, Santos said it was now ramping up the Cooper Oil Project.

“Over the first half of 2006, we successfully commissioned three automated rigs, and rolled out a large amount of infrastructure, including flow lines, spur lines and power supplies,” Ellice-Flint said.

“Overall, the project is targeting 1000 wells over five years. To date, we have drilled 42 wells, with 37 successful, giving a success rate of 88%.”

Production Outlook

Production guidance is unchanged from the previously advised estimates of between 60MMboe and 61MMboe in 2006 and between 62MMboe and 63MMboe in 2007.