Australian oil and gas explorer Santos posted a bigger-than-expected fall in first-half profit on Wednesday, dented by lower realised prices and higher production costs amid weak demand from top consumer China, sending its shares lower.

Supply-chain disruptions owing to geopolitical factors and weakening demand from China due to a slower economic recovery have led to unpredictable price fluctuations.

Santos, Australia's second-largest independent gas producer, reported an underlying profit of $654 million for the six months ended June 30, down from $801-million last year. That missed a Visible Alpha consensus estimate of $694.5 million.

"The miss is largely at the EBITDA (earnings before interest, tax, depreciation and amortisation) level across most cost line items, and unit opex has come in at the high end of guidance," analysts at Citi said in a note.

Unit costs of $7.94 per barrel of oil equivalent were higher than the 2023 average of $7.61, mainly due to increased maintenance activities in the Cooper Basin in South Australia and higher electricity costs in Queensland.

Shares of Santos fell as much as 3.7% to A$7.530 by 1209 GMT to hit their lowest in two weeks, while the broader market was down 0.3%.

Santos posted a 9% fall in product sales revenue, with lower sales volumes due to reduced output from the Bayu-Undan field and weaker LNG prices outweighing gains in liquid products prices.

Its average realised oil price increased 4% to $89.32 per barrel, while the average realized LNG price decreased 9% to $12.10 per million British thermal units (mmBtu).

Meanwhile, Santos, the operator of the Pikka Unit joint venture in Alaska, said first oil from the project is now seen in the first half of 2026 compared with earlier expectation of 2026.

The company declared an interim dividend of 13 cents per share, beating the Visible Alpha consensus estimate of 10 cents and above 8.7 cents from a year earlier.

For 2024, Santos maintained its forecast for sales and production volume.