Santos upbeat despite Varanus impact

Oil and gas producer Santos Ltd has delivered a rise in revenue in the third quarter despite the Varanus Island gas explosion impacting production.

Sales revenue over the three months to the end of December climbed 16 per cent on the previous corresponding quarter to $730 million due to higher oil and gas prices.

Output dropped 12 per cent to 13.2 million barrels of oil equivalent (mmboe) during the period after the explosion at the Varanus Island processing plant in Western Australia.

The incident in June stopped production from both the East Spar joint venture and the Harriet joint venture.

Santos maintained its production guidance of 54 to 56 mmboe.

"The outlook for Santos remains positive despite the global financial crisis," Santos chief executive David Knox said in a statement.

Shares in Santos dropped 72 cents, or 6.14 per cent to $11.00 by 1052 AEDT.

Santos has increased its production cost guidance for the year by $20 million to $80 million due to additional well maintenance work at Mutineer Exeter in WA, increased Cooper Basin oil work in South Australia, trucking costs and maintenance activities.

The company completed its liquefied natural gas partnership with Malaysia's national oil company Petronas during the quarter and received a $US2 billion ($A2.97 billion) payment in July.

The joint venture is proposing to develop an LNG plant in Queensland, using coal seam gas as feed.