* Underlying profit up 3 pct, beats forecasts
* Dividend up 33 pct to 20 cts a share v forecasts for 15
* Santos expects stronger H2
(Recasts with dividend surprise, adds analyst comment)
MELBOURNE, Aug 22 Australian oil and gas
producer Santos Ltd beat forecasts with a 3 percent
rise in first-half core profit and rewarded shareholders with a
33 percent dividend hike as it flagged an expected stronger
Some analysts had thought Santos might unveil a cash return
to investors who have raised concerns about the outlook for its
$18.5 billion Gladstone liquefied natural gas (LNG) project, but
it opted instead to step up its dividend.
"I think it's a clever way to achieve a bit of goodwill from
the market," said Mark Samter, an analyst at Credit Suisse, who
said the company still faces the challenge of proving the GLNG
project can generate a good return.
Santos said Gladstone LNG was on track to start producing in
2015, on budget.
Underlying profit rose to A$258 million for the six months
to June from A$251 million a year earlier, beating an average
forecast from four analysts of A$222 million.
The result was stronger than expected as tax and royalty
payments were lower than some analysts had tipped.
"We have set the foundation for a stronger second half,"
Santos CEO David Knox said in a statement.
Net profit fell 24 percent to A$206 million, hit by
writedowns of A$70 million mostly related to its Indonesian coal
seam methane business. The writedowns had been flagged to
Santos shares have slipped 0.3 percent this year,
underperforming a 5.4 percent rise in the broader market
. The stock was poised to open higher on Friday after the
(Reporting by Sonali Paul; Editing by Edwina Gibbs and Richard