Santos’ full year net profit has dropped by nearly a third but the oil and gas producer still expects to meet its production targets in 2013.

Net profit for the full year to December 31 fell to $519 million from $753 million in 2011, when Santos benefited from various asset sales.

Revenue rose 18 per cent to $3.3 billion. Underlying profit rose 34 per cent to $606 million, driven by higher liquids volumes and gas prices which were partly offset by higher costs linked to new assets.

Santos confirmed it still expects to meet its production forecast for 2013 of 53-57 million barrels of oil equivalent (mmboe) and capital expenditure of about $4 billion. The company maintained its fully franked final dividend at 15 cents a share.

Like other gas producers, Santos has been grappling with cost increases on development projects, with the strong Australian dollar a major factor. Rival Origin Energy on Thursday announced a 7 per cent hike in costs at its Australia Pacific LNG project.

Santos said its $US18.5 billion Gladstone coal seam gas to LNG (GLNG) project in Queensland, which is almost half complete, was still on track to start producing LNG in 2015.

GLNG has had to purchase additional gas reserves from producers in the area, a move that some industry analysts have interpreted as a sign Santos has not been as successful as it had hoped in proving up gas reserves for its flagship development.

Santos said the Exxon Mobil-led $US19 billion Papua New Guinea LNG project was also on track to come online in 2014.

Investors have responded positively to the news, lifting Santos shares by 37 cents - 3.1 per cent - to $12.27 in early trade this morning.

AAP, Reuters