Santos Ltd, Australia's No. 2 independent gas producer, said on Tuesday it is reviewing all its capital spending plans in light of the collapse in oil prices and would stop all new hiring.
Santos had planned to spend $1.45 billion in 2020, including $500 million on major growth activities, focused on its Barossa gas project off northern Australia and the Dorado oil project off Western Australia.
"Santos is currently reviewing all discretionary capex activities and will be freezing new external hiring for now, but there are no plans for mass job cuts because we have focussed over the last few years on being right-sized to remain resilient at low oil prices," Santos Chief Executive Kevin Gallagher said in emailed comments to Reuters.
Analysts said the move was not surprising following the halving in oil prices over the past two months and a 54% slide in Santos's share price in the past month due to a slump in oil demand due to the coronavirus and a Saudi-led oil price war.
"They're going to have to pull all sorts of levers, and that may mean delaying projects," said Andy Foster, senior investment officer at Argo Investments, a Santos shareholder.
The company still expects to complete the $1.39 billion acquisition of the Bayu-Undan and Darwin LNG assets from ConocoPhillips in the current quarter, a Santos spokesman said.
It also still aims to reach a final investment decision on the $4.7 billion Barossa project and a decision on starting early engineering work on the $2 billion Dorado project by the end of June, "subject to market conditions".
"Santos is a much more resilient company today than we were in 2015-2016 when we last faced very challenging oil price and market conditions," Gallagher said in the emailed comments.
He said it is partly protected against weaker oil prices as 35% of its sales are on fixed price contracts, and it has slashed its cashflow breakeven price to $29 a barrel.
"I, therefore, remain confident that when prices and demand recover, which they will, our projects will be much better placed than those of our competitor countries, including the U.S., Canada, Tanzania, Indonesia, Mozambique and Russia," Gallagher said.
Santos, like its bigger Australian rival Woodside Petroleum, is looking to sell down stakes in its growth projects to help fund the developments.
"Asset sales will become a lot more challenging in this environment," Foster said.
(Reporting by Sonali Paul; Editing by Leslie Adler and Richard Pullin)
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