Santos’ underlying profit slumped more than $US1 billion on the previous year to $US1.423 billion ($2.172 billion),but that didn’t deter the oil and gas major from setting an unfranked half-year dividend of US17.5¢ per share,giving investors a record total cash return for the full year of $US852 million ($1.3 billion).
Chief executive Kevin Gallagher said the cash return to investors resulted from Santos’ high-performance culture,disciplined low-cost operating model and strong focus on safety.
Santos’ policy is to pay investors 40 per cent of its free cash flow from its operations to investors,excluding revenue from disposals. However,MST Financial energy analyst Saul Kavonic told clients Santos had used $US350 million ($533 million) from selling equity in its PNG gas project to meet the 40 per cent benchmark.
“It raises questions if Santos needs to sell down assets in order to meet its own dividend/buyback policy,which is unsustainable,” Kavonic said.
Gallagher told investment analysts the board decided the dividend was large enough without also diverting proceeds from the PNG sale to shareholders.
Brynn O’Brien,executive director at the Australasian Centre for Corporate Responsibility,also labelled the dividend unsustainable,relying on increased gearing,with the $US852 million return to shareholders coinciding with a $US814 million jump in net debt.