March 22, 2020 / 11:19 PM / 6 days ago

UPDATE 1-Australia's Santos cuts spending, defers Barossa decision as oil crashes

(Adds context on Barossa project, details, CEO comment)

March 23 (Reuters) - Oil and gas producer Santos Ltd said on Monday it will slash capital spending in 2020 and defer an investment decision on Barossa as oil prices plunge and the coronavirus outbreak dents business sentiment.

The Australia-based producer said it would cut its full-year capital spending by 38%, or $550 million and aim for free cash flow to breakeven at an oil price of $25 per barrel as it navigates to remain low-cost in the current environment.

“Given the uncertain economic impact of COVID-19 combined with the lower oil price, we expect to defer FID (final investment decision) on Barossa until business conditions improve,” CEO and Managing Director Kevin Gallagher said.

The FID on Barossa gas project, which is a joint venture between Santos, ConocoPhillips and South Korea’s SK E&S Co Ltd, was originally expected in the March quarter.

Barossa’s development was key to Santos as it would have helped keep Darwin LNG plant open since the gas field that feeds it currently is set to run dry in 2022.

The acquisition of ConocoPhillips’ north Australian assets, which is expected to boost Santos output by 25% and give it control over Darwin LNG, will likely close by first-half instead of the first-quarter of this year, the company added.

Last week, peer Oil Search Ltd also cut capital spending in 2020 and delayed work at an Alaskan project to cope with crashing oil prices.

Oil prices have fallen for four weeks and have lost about 60% since the start of the year. The coronavirus, which has infected more than 300,000 and killed over 13,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough. (Reporting by Anushka Trivedi in Bengaluru; Editing by Himani Sarkar)

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