SANTOS has wound back 2013 production expectations and delivered lower-than-expected third-quarter revenue and production after problems on the newly started $490 million Fletcher-Finucane floating oil platform in Western Australia and lower production from Vietnam. While Santos reported record quarterly revenue of $1.027 billion, up from $797m the previous quarter because of higher oil production, the company missed Deutsche Bank expectations of $1.071bn. Production volumes of 13.4 million barrels of oil equivalent were up 8 per cent from the previous quarter, but missed Deutsche's expectations of 13.9 million barrels. "The production miss was led by volumes from Chim Sao (in Vietnam) on a gas pipeline outage and Fletcher Finucane due to water treatment issues," Deutsche Bank analyst John Hirjee said. Problems at Chim Sao were revealed in the second-quarter report three months ago but these seem to have worsened, with oil production curtailed. At Fletcher Finucane, which started producing in May in WA's Carnarvon Basin, Santos has had to defer oil production because of "water separation systems on the floating production, storage and offloading facility." The two issues led Santos to deliver its second guidance downgrade in two quarters. The company said 2013 production would be at the lower end of guidance of 52-55 million barrels of oil equivalent. That guidance was issued with the June-quarter report and had been downgraded from between 53 million and 57 million. Santos managing director David Knox said the record sales revenue demonstrated the performance of the existing business as the company prepared to bring on new projects. "Excellent progress continues to be made on our two major growth projects, with PNG LNG over 90 per cent complete and Gladstone LNG over 65 per cent," Mr Knox said. Both projects remain on schedule and capital cost estimates remain unchanged. Despite the operational problems, Santos shares held up fairly well yesterday, emphasising investor focus on the big LNG projects that are expected to see the company's cashflows more than double from current levels. The stock finished down 14c at $14.75. The company has also removed references to a horizontal well it had planned to drill this half to test the shale potential of ground in the onshore Cooper Basin that sits across the Queensland-South Australia border. In its June report, Santos said it would drill the Moomba 193 well (known as Aurora-2) in the second half. In yesterday's report, no mention was made of the well but a spokesman said the Moomba 193 well was due to start drilling this quarter.