MUMBAI (Thomson Financial) - Fitch Ratings said Australian oil and gas group
Santos Ltd's poorer than expected full-year results highlight the risks of cost
inflation for oil and gas companies.
Santos, rated the nation's third-largest oil and gas group after BHP
Billiton and Woodside Petroleum, said today its 2007 net profit fell 31.5 pct to
440.6 mln aud from last year's 643.3 mln aud due to falling production from
mature fields.
It said its performance had also been impacted by lower output at its
Mutineer-Exeter oil field off the northwest coast because of technical faults.
In an inflationary environment, oil and gas companies with hedged or fixed
price production are less protected than those which sell at spot prices, as
high selling prices mitigate the cost pressure, the ratings agency said.
This is especially the case for Santos and Woodside Petroleum, given their
large capex programs in 2008.
Santos plans to spend over 1.5 bln aud on a number of capital programs in
2008 and Woodside over 5 bln aud, the bulk of which will on the Pluto LNG
project.
The main challenge for Santos and Woodside, will be controlling both
operating and capex costs whilst maintaining forecast production volumes, Fitch
said.
TFN.newsdesk@thomson.com
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