Oil and gas producer Santos has revealed plans to shore up its financial position during the coronavirus pandemic. It will reduce its 2020 capital expenditure (capex) and defer the final investment decision (FID) on its Barossa project.
The Australia-based producer said it would cut its full-year capital spending by $550m, about 38% of its planned budget. It would also cut another $50m from its production costs.
It has delayed the $7bn FID on the Barossa offshore development project. The company has not yet given a revised timeline for making a decision on the project, which would supply replacement gas for the Darwin LNG facility.
Santos also said it is aiming for free cash flow breakeven at an oil price of $25 a barrel. It generated $186m in free cash flow in the first two months of this year.
Santos managing director and CEO Kevin Gallagher said: “We have implemented a series of measures to protect the health and safety of our people, including restricting travel and meetings, implementing social distancing measures across all of our sites and making changes to field and office access arrangements.”
“We are confident in the business continuity and contingency plans that have been implemented and will continue to monitor and introduce additional measures in accordance with Australian Government health advice to protect our people and maintain operations.
“It is vitally important, in the current global and national crisis, that companies like Santos continue to provide secure energy supplies for our customers.”
Barossa project history
Recently, the company agreed to a $390m deal to sell a 25% stake in northern Australian assets to South Korean energy group SK E&S.
Santos said it now expects to acquire the assets in the second quarter of this year. It originally intended to acquire the assets, formerly owned by ConocoPhillips, in the first quarter.
Earlier this month, ConocoPhillips awarded a contract to engineering firm Subsea 7 for the Barossa project to supply infield flowlines and SURF infrastructure.
Meanwhile, Australia is shutting down non-essential services. Santos operates in the country, where coronavirus cases have reached 1,315.