Santos has cut spending and deferred a major project in Australia due to the sudden oil price crash.Credit:Brendan Esposito
Santos chief executive Kevin Gallagher on Monday said the ASX-listed company would cut its full-year capital spending by 38 per cent,or $550 million,and delay making a final investment decision on its $7 billion Barossa gas project off the coast of Darwin until business conditions improved.
"The current environment is a time for discipline,"Mr Gallagher said.
"The initiatives announced today demonstrate we are taking decisive action to ensure Santos is well-positioned in a lower oil-price environment."
Suffering the sharpest price falls since the Gulf War in 1991,the benchmark Brent crude and West Texas Intermediate oil prices have halved since the start of the year,dipping below $US30 a barrel and triggering a savage sell-off in oil and gas stocks. In response,producers have been detailing deep cuts to discretionary spending,new project delays and withdrawals from merger and acquisition talks as they seek to weather the storm and moderate market concerns about their profitability.
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The cutbacks at Santos come after another Australian-listed producer,Oil Search,told investors it would suspend all its discretionary spending last week in a bid to preserve the value of the business. Shelving natural gas projects all around the world and halting negotiations to sell a stake in assets in Alaska,the company lowered its expected spending by up to $675 million,or 40 per cent.
"These unprecedented times require us to take immediate and decisive steps to position us for a potentially extended period of lower oil prices and business uncertainty,"Oil Search managing director Keiran Wulff said.