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Santos narrows loss to $1.4b, Virgin dives into the red

12:22 UTC+8 February 17, 2017 | Stephen Letts

Virgin swung to a $21.5 million half-year loss. (AAP: Dean Lewins)

Adelaide-based oil and gas producer Santos has been dragged deeply into the red by a billion-dollar write-down on its massive investment in Queensland's nascent LNG export sector.

Santos reported a full year loss of $US1.05 billion ($1.4 billion) on the back of a previously flagged post-tax $US1.1 billion impairment charge on the company's 30 per cent stake in the $19 billion Gladstone LNG project.

However, the result is still an improvement on the $US1.95 billion ($2.5 billion) loss the year before.

The 2016 impairment is of a similar magnitude to the $1 billion write-down Origin Energy made on its share of the neighbouring APLNG project this week.

Collectively, the three big projects based on Curtis Island off Gladstone, which cost around $80 billion to construct, have announced post-tax impairments of more than $12 billion.

In pre-tax terms, that is a cost to treasury of more than $40 billion.

In underlying terms, with the impact of the write-down removed, Santos reported a full-year profit of $US63 million ($82 million), an increase of almost 30 per cent on 2015.

Sales revenue rose 6 per cent to $US2.6 billion ($3.4 billion), driven by record volumes outweighing an average 14 per cent fall in realised prices to $US46.43 a barrel.

Santos chief executive Kevin Gallagher said the company's turnaround strategy is starting to deliver.

"In 2016, the Santos leadership team took tough, decisive action to stabilise the business and build foundations for future growth," Mr Gallagher said.

Santos is now profitable at $US36.50 a barrel oil prices and generated a free cash flow of $370 million last year.

"In 2017, we will further refine our operating model to drive costs down, improve cash flow and reduce debt," Mr Gallagher told investors.

The board put balance sheet stability ahead of shareholders' wallets, cancelling the final dividend.

At midday (AEDT) Santos shares were down 1.3 per cent to $3.92 in a generally mixed market for the energy sector.

Virgin Australia dives into the red

The nation's number two carrier Virgin Australia has dived to a first-half loss of $21.5 million, down from a $63 million profit a year ago.

While tougher conditions and competition did not help, the slide into the red was primarily driven by restructuring costs.

Virgin's underlying profit roughly halved to $42.3 million on marginally weaker sales.

Virgin made considerable progress on slashing its debt bill, with net debt falling 44 per cent to $936 million.

Chief executive John Borghetti said, despite subdued trading conditions in its domestic market, the group had strengthened its liquidity and cash position and was ahead of schedule in the "better business" restructuring program.

Mr Borghetti declined to proffer forward guidance citing "uncertainty in external market conditions".

Mr Borghetti also announced an alliance with HNA Aviation to operate flights to Hong Kong and Chinese mainland.

The service is expected to start mid-2017, if it clears the ACCC's regulatory hurdles.

"This new alliance will be a game changer for travel between Australia and China, providing significantly more competition and choice for travellers," Mr Borghetti said.

However, Virgin shares also lost altitude, down 1.3 per cent to 19 cents at midday (AEDT).

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