Energy firm Santos Ltd (ASX: STO) said on Thursday that its operations in Cooper Basin would continue to be plagued by flooding in Central Australia, as the company reported that production declined by 11 percent in the June quarter but sales volume and revenue saw a spike of two percent and 20 percent respectively.

However, company chief executive David Knox clarified that the Cooper Basin mining site is now undergoing recovery works and all rigs affected by the flooding resumed full operation as he admitted that overall operations on the site would be affected for more months to come.

Mr Knox revealed that Cooper Basin's productions of gas and liquid actually improved in the three months leading to June and the company is looking forward for continued increase "in the coming months as recovery from the flood events continues."

Santos said that production guidance should remain between 49 and 52 MMBOE for this year while production cost guidance should reach a high of $580 million in 2010 as compared to the previous guidance high of $560, which the company attributed to higher production costs in its John Brookes site and the flooding impacts in Cooper Basin.

The company effected no change to depreciation, depletion and amortisation expense guidance at $11.70 per BOE though royalty related taxation expense was ease down to $70 million to $90 million after tax, coming from previous expectations of $90 million to $110 million, with capital expenditure guidance also pulled down by $300 million to $2.3 billion.

Mr Knox said that expenditures on the company's GLNG project largely contributed to its lowered capital expenditure guidance as he reported that the project is continuing to see "significant progress towards a final investment decision later in 2010, engineering design works are nearing completion and environmental approval has been received from the Queensland government."

He added that GLNG is maintaining its negotiations with numerous parties that may be interested to possible LNG sales deal, equity in the project and collusion between projects.

Santos expressed confidence that overall sales for Cooper Basin this year would not be hit hard by the recent flooding in Central Australia since customer deliveries were being met as the company dug deep on its current production and inventory.

It added that quarterly production of natural gas, ethane and LNG in 54 PJ saw a decrease of nine percent as compared to the previous period last year thanks to much lower Cooper Basin output and the planned shutdown of Darwin LNG though such declines were cancelled out by better outputs from John Brookes and its Indonesian mining operations.