February 20, 2019 / 10:37 PM / a year ago

UPDATE 1-Australia's Santos posts record profit on higher oil & gas prices

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Feb 21 (Reuters) - Santos Ltd, Australia’s No. 2 independent gas producer, reported on Thursday a more than two-fold rise in annual underlying profit, helped by the acquisition of Quadrant assets and higher realised prices for its oil and gas.

Underlying profit for 2018 rose to a record $727 million from $318 million a year earlier. Four analysts on an average had expected underlying profit of $609.5 million, according to Refinitiv data.

The Adelaide-based company declared a final dividend of 6.2 cents a share. It had revived the payout policy with an interim payment for the half-year ended June 30, 2018 following a more than two-year lull.

The company said it would allocate about $1.1 billion as capital expenditure for full-year 2019 and affirmed estimates for production and sales volumes announced last month.

Chief Executive Kevin Gallagher said the Quadrant acquisition, combined with organic reserves additions, contributed to strong reserves growth in 2018.

Firm LNG prices, coupled with sharp cost cuts and asset sales enabled Santos to achieve its debt target over a year ahead of plan in October 2018.

By slashing debt, Santos set itself up to stave off takeover offers, revive its dividend and hunt for assets to expand its portfolio. It acquired Quadrant, the biggest gas supplier to the domestic market in Western Australia, for more than $2 billion last year, boosting production.

However, the acquisition of Quadrant, using cash and new debt, pushed Santos’ debt to $3.6 billion as of Dec. 31.

In September, Santos had outlined its growth strategy, planning to nearly double production to more than 100 million barrels of oil equivalent by 2025.

Shares of the company have inched up 0.6 percent in 2018 and have risen more than 26 percent so far this year.

Reporting by Aby Jose Koilparambil in Bengaluru Editing by Chris Reese and Richard Chang

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